Egypt's Spring Revolution (2011-2013)

[Marc]

5 % > 2 % => economic growth was not insufficient.

Export growth was probably insufficient, income distribution was probably insufficient - but neither of those is the same as economic growth.

My reply had thus a bearing on the matter under discussion because I corrected a contribution to said discussion that I consider to be wrong.

@Fuchs, I guess my post was too short to be clear.

In my post I stated: "The problem was that economic growth in Egypt was insufficient to cover the cost of patronizing the fast-growing population."

As you said, economic growth in Egypt was about 5% and population growth about 2%. However, 2% growth in population does not mean that the cost of patronizing the population increases by 2%. Egypt uses subsidies to keep the bread price low. Roughly speaking, the cost of maintaining these subsidies depends on the amount of bread a person eats (unchanged), multiplied by the cost of wheat (rising) and multiplied by the number of people who depend on subsidized bread (rising at a higher rate than population growth). The reason why the percentage of people who depend on subsidized bread rises is that when the price of unsubsidized bread increases, more people will buy subsidized rather than unsubsidized bread.

In summary, the rising costs of patronizing the population was CAUSED by population growth, but it increased at a much HIGHER RATE than population growth.

[Fuchs]

The reason why the percentage of people who depend on subsidized bread rises is that when the price of unsubsidized bread increases, more people will buy subsidized rather than unsubsidized bread.

In summary, the rising costs of patronizing the population was CAUSED by population growth, but it increased at a much HIGHER RATE than population growth.

I also showed that even at the peak of the wheat price, wheat imports were still a tiny fraction of overall imports, even a small fraction of the trade balance deficit.

The whole focus on wheat / bread is wrong.

[Dayuhan]

I also showed that even at the peak of the wheat price, wheat imports were still a tiny fraction of overall imports, even a small fraction of the trade balance deficit.

The whole focus on wheat / bread is wrong.

The percentage of overall imports is not relevant: most imports are not paid for by the government. The relevant statistic would be the percentage of government funds spent on wheat imports, and (more important) the rate at which that spending was increasing. The issue is the government's capacity to import - at government expense - wheat for subsidized distribution. This expense was unquestionably increasing, and the volatility of wheat prices must have made budgeting a nightmare: how do you budget for the purchase of 6 million tons of wheat every year when you don't know what it will cost from week to week?

30% inflation in two years, driven largely by steep increases in the price of staple foods, unquestionably played a part in pushing public anger to the breaking point. The next government will unquestionably be judged largely on its ability to reverse that trend, which it will not be able to do without a period of subsidy.

The comment I started this with was that while eliminating subsidies is good economics, doing it too quickly can generate huge disaffection at a time when a political transition is very fragile. I think it's a valid point. Prices of staples do make a difference.

[Fuchs]

You budget for purchasing wheat just like any trader in a volatile market does. That should be outright simple for a dictator.


There's furthermore no great difference between private imports and state imports. The greatest difference is that the state can use the foreign cash reserves of the central bank.

30% inflation is still something different than to lack economic growth.

[Marc]

I also showed that even at the peak of the wheat price, wheat imports were still a tiny fraction of overall imports, even a small fraction of the trade balance deficit.

The whole focus on wheat / bread is wrong.

Fuchs, ok, I understand what you are saying.

I think this is the right time for a compairison. Egypt's overall trade deficit is about $23 bn. The 8 million tons of wheat that Egypt imports each year represents a trade volume $3.5 bn or 7% of overall imports. According to you, this is but a tiny fraction. Therefore, it cannot be an important factor in the current Egyptian situation.

Let us take a look at these figures from another perspective. In 2010, crude oil represented 8% of US overall imports, a percentage that is comparable to the volume of wheat imports in Egypt. Is it a fair assessment to say that oil dependency is a negligible factor in US internal and external politics?

[Fuchs]

Is it a fair assessment to say that oil dependency is a negligible factor in US internal and external politics?

U.S politics are - well, how could I phrase that without being too offensive?

The oil imports are still just a tiny share of U.S. imports and typically smaller than the U.S. trade balance deficit, of course.


You may argue that Egyptian politics were not rational and thus the wheat stuff was still important - but the same could be said for the much bigger bills that stood behind the huge rest of the trade balance deficit.


It's fashionable and simple to single out well-known themes and suspect that they played a decisive role in Egypt and/or Tunisia; Malthusian trap, facebook, twitter - convenient and simple explanations.


Convenient and simple explanations are suspicious by definition in a complex world like ours. The typical ones applied to the Egyptian revolution don't pass simple tests and thus I reject them.


@Entropy:

You can search the for the CIA's role in burying the missile and bomber gaps with the Soviets.

Would you please elaborate on this?
Those "missile gaps" were in part hoax (the one around '60), in part nonsense based on lack of logic thinking (the SS-20 scare). There was also no real bomber gap, ever - just a flimsy CONUS/Canada air defence and an almost worthless SM-1 naval air defence system.

[jmm99]

Has anyone else noticed that the Egyptian armed forces seem to have been following along with much of the advice given by Frank Kitson in Chap. 5 "The Non-Violent Phase" of his Low Intensity Operations, Subversion, Insurgency, and Peacekeeping (reprint from Hailer Publishing; and original in pdf) ?

See also this piece by Eric Margolis, Egypt's Faux Revolution: Bait and Switch on the Nile, which doesn't cite Kitson; but which suggests that the counter-insurgency strategy has been a "bait and switch" (which is what Kitson's Chap. 5 boils down to).

The "new" government seems to have gained something of a grace period, from Google Inc. executive Wael Ghonim:

“If you get paid 70 dollars, this is not the time to ask for 100 dollars,” Ghonim said in an interview with Bloomberg Television yesterday. “If you really care about this country, it is not about you anymore. This is about restoring you know, that stability. This is about sending signals to everyone that Egypt is becoming stable and we are working on that.”

Ghonim, 30, who was released on Feb. 8 after being held by the government in secret detention for more than a week, said he met military leaders over the weekend and he believes they are “really sincere” about bringing about the change demanded by the Egyptian people.

“They realize the value of business and creating jobs,” the activist said. “We had a half an hour discussion about the challenges of how to get people back to work and how to create jobs. They are aware of the problems.”

And, although unrest still exists, the focus has shifted to the economy generally and to specific sectors:

Egypt's Transitional Government Struggles to Retain StabilityBy Leland Vittert, Published February 14, 2011, FoxNews.com

CAIRO, Egypt – As Egypt struggles to return to normal just three days after former president Hosni Mubarak resigned, hundreds of government workers went on strike Monday over wages and corruption.

The Egyptian transition government, led by the army, tried to contain a wave of protesters who defied orders not to strike. Bus drivers and ambulance workers walked off the job and a group of police protesters marched through the streets.

The instability comes as the Egyptian people are demanding to know what the next government will look like and how it will begin an economic recovery. .....

Regards

Mike

[Cliff]

U.S politics are - well, how could I phrase that without being too offensive?

The oil imports are still just a tiny share of U.S. imports and typically smaller than the U.S. trade balance deficit, of course.

You may argue that Egyptian politics were not rational and thus the wheat stuff was still important - but the same could be said for the much bigger bills that stood behind the huge rest of the trade balance deficit.

It's fashionable and simple to single out well-known themes and suspect that they played a decisive role in Egypt and/or Tunisia; Malthusian trap, facebook, twitter - convenient and simple explanations.

Convenient and simple explanations are suspicious by definition in a complex world like ours. The typical ones applied to the Egyptian revolution don't pass simple tests and thus I reject them.

OK, so much for Occam's Razor I guess, right?

Fuchs, since you think that economic, demographic, and technology issues were not the cause, what do you think it was? If these were not catalysts, what was?

V/R,

Cliff

[Fuchs]

Isn't 2/3rds of a country not remembering a time when they were free to speak their mind in public a good enough reason?

Maybe it was the contrast between the overt corruption of the Egyptian establishment and public servants on one side and the world as shown by Al Jazeera on the other side?


Food price inflation between 22 and 24% may have contributed, but only as a microeconomic issue, not as a macroecoonomic issue. The country as a whole was easily able to afford its nutrition.
A suppression of strikes and the resulting freeze of wages in combination with some other factors (insufficient effectiveness of food subsidies, for example) might be blamed if private food costs were really the issue.
I do somehow doubt that being hungry for lack of money and being a political activist with internet access fit together, though.


A usual suspect - income inequality - doesn't stand a basic test as a primary or even sole reason for the revolution. Many countries have a more appalling income distribution (including Turkey, most of both Americas and South Africa as examples).

Yet another usual suspect - unemployment and underemployment - doesn't stand a basic (superficial) test either (private sector employment grew by about 3% for several years, indicating no significantly deteriorating situation (or at least no deterioration below the state of about 2000).


Maybe - just maybe - the question should be directed at an Egyptian, not at a German. Just a thought.

Actually, I do not understand why you are so adamant to reject the argument that someone's daily bread (literally) is a prime motivator for militant action. What simple tests allow you to do that?

As a professional economist, I differentiate between microeconomics and macroeconomics.
Population growth is a macroeconomic thing.
A family patron being working poor and unable to feed his family is a microeconomic thing.
Egypt was quite fine in the macroeconomic level (except for the trade balance deficit, of course - but that was not an immediate shock because they still got credit). Economic growth was higher than population growth. Population growth - the macroeconomic property - was thus not the immediate reason behind the revolution.
Things were likely really ugly at the microeconomic level for a large share of the urban population (rural populations rarely count in sudden revolutions - and they were probably profiteering in the last years anyway).
Here you can argue about bread price inflation and stagnant wages, but that's a completely different thing than population growth and world marked wheat prices.

In other words; population growth and wheat prices are far away behind several corners, while suppression of strikes and the resulting wage stagnation coupled with food price inflation are probably just around a single corner.

[davidbfpo]

A BBC News summary, which covers the issues the new, sorry adjusted regime:http://www.bbc.co.uk/news/world-middle-east-12471990


I was struck by these passages:

This trust, however wary, may be unrealistic. The Egyptian military was the backbone of the regime of Hosni Mubarak, it has its own economic interests and may not be the unified and disciplined institution that it seems from the outside.

Citing Max Rodenbeck, the Economist's chief Middle East writer and a long-term Cairo resident:

One of the many worries is that the military is so isolated from society, that it has been for so long a world unto itself. This was very useful when it had to step in to take control of the situation in a crisis. But does it have the management and communications skills and network to manage this situation?

[Dayuhan]

Isn't 2/3rds of a country not remembering a time when they were free to speak their mind in public a good enough reason?

If despotism alone were enough to generate revolution there would be a lot fewer despots in the world.

In an urban environment with a large number of economically marginal residents the price of food is always a key issue, and it's been a major concern for despots for a long time: one recalls the Roman emperors placating the masses with bread and circuses, and Marie Antoinette's infamous "let them eat cake".

Micro is what it's all about: urban insurrections involve a very small percentage of the population. Overall employment rates mean less than the ability to absorb young people coming into the labor force, and GDP growth has little impact on the ability of poor people to put food in their stomachs or the ability of the government to supply cheap food.

Cairo had bread riots when wheat prices spiked in 2008, but the time wasn't yet ripe for expansion to full revolt. This time around it was different. Wheat prices spiked in 2008 and 2011; Cairo had rioting in the streets in 2008 and threw out a government in 2011... no relationship?

Of course resentment toward dictatorship is an underlying cause, but specific economic conditions play a major part in translating that general resentment into action. National unemployment may have been up, but it wasn't up among the mass of young urban males who compose the Twitterless footsoldiers of the revolution. Bread prices made a difference, and they will be a factor in the effort to produce a stable transition.

[AdamG]

Meanwhile, from Page B3 of your local fish-wrapper...

Three months after the ouster of Hosni Mubarak, a surging crime wave in post-revolutionary Egypt has emerged as a serious threat to its promised transition to democracy. Businessmen, politicians and human rights activists say they fear that the mounting disorder — from sectarian strife to soccer riots — is hampering a desperately needed economic recovery or, worse, inviting a new authoritarian crackdown.

At least five attempted jailbreaks have been reported in Cairo in the past two weeks, at least three of them successful. Other similar attempts take place “every day,” a senior Interior Ministry official said, speaking on the condition of anonymity because he was not authorized to talk publicly.

http://www.nytimes.com/2011/05/13/wo...t/13egypt.html

AMONG THE MORE heartening aspects of the peaceful revolution that toppled Hosni Mubarak was the way it brought together people from across Egypt’s social and religious spectrum. Muslims joined hands, literally and figuratively, with members of the country’s large Coptic Christian minority and stood together for democracy.

So one of the most disheartening events since Mr. Mubarak’s downfall was the sectarian violence in Cairo over the weekend, in which 13 people, six Muslims and seven Coptic Christians, died. Security personnel apparently did little to stop the mayhem, which began when Muslim men advanced on a Coptic church and armed Christians gathered to defend it. It was an episode disturbingly similar to many others over the past decades in which Egyptian Christians came under attack and the Mubarak regime did little or nothing to prevent or punish the perpetrators.

http://www.washingtonpost.com/opinio...fsG_story.html

[Surferbeetle]

Egypt’s population size is approximately 80 million persons and it has an approximate debt of 80 billion USD.

Reflections on the Revolution in Egypt, By Gideon Rachman, Published: February 14 2011 21:28, Financial Times

The Egyptian revolution was driven, not just by the internet, but by many of the same forces that have sparked revolutions throughout the ages: hatred of a corrupt autocracy and its secret police; the frustrations of a rising middle class; the desperation of the poor.

This is a country where 44 per cent of the population is illiterate or semi-literate and where 40 per cent live on less than $2 a day. Low wages, rising food prices and high youth unemployment mean that there are plenty of frustrated people, whose voices will now be heard in a freer political climate. The government is already running a big budget deficit, so has few resources to buy off the discontented.

Egypt faces bleak outlook on debt, by Robin Wigglesworth, Published: February 9 2011 16:21 | Last updated: February 9 2011 16:21, Financial Times

Egypt’s political upheaval sent the yield on the government’s 5.75 per cent bond due in April 2020 to a record of 7.2 per cent on January 31, when Egyptian credit-default swaps – a kind of bond default insurance – soared to 450 basis points. The yield on Egypt’s 2020 bond has since eased to about 6.3 per cent, and the cost of Egyptian CDSs has dropped to 345 basis points, according to Markit, a data provider.

Egypt Unrest Hits Projects, by Debra K. Rubin and Gary J. Tulacz, with Peter Reina, Jenna McKnight, Scott Lewis, and Tom Sawyer, Engineering News-Record, February 14, 2011

A look at major projects in Egypt

• Al Dabaa nuclear powerplant, Est. cost 4 billion USD, Egyptian and Austrailian firms involved

• Cairo Metro transit line No. 3, Est. cost 3 billion USD, French and Egyptian firms involved

• Nile Corniche mixed use development, Est. cost 1 billion USD, Dubai and Egyptian firms involved

• Grand Egyptian Museum, Est. cost 800 million USD, US, UK, and Egyptian firms involved

• Mall of Egypt, Est. cost 770 million USD, US and Egyptian firms involved

Credit Default Swaps

In its simplest form, a credit default swap is a bilateral contract between the buyer and seller of protection. The CDS will refer to a "reference entity" or "reference obligor", usually a corporation or government. The reference entity is not a party to the contract. The protection buyer makes quarterly premium payments—the "spread"—to the protection seller. If the reference entity defaults, the protection seller pays the buyer the par value of the bond in exchange for physical delivery of the bond, although settlement may also be by cash or auction.[1][2] A default is referred to as a "credit event" and includes such events as failure to pay, restructuring and bankruptcy.[2] Most CDSs are in the $10–$20 million range with maturities between one and 10 years.[3]

[Marc]

You may argue that Egyptian politics were not rational and thus the wheat stuff was still important - but the same could be said for the much bigger bills that stood behind the huge rest of the trade balance deficit.


It's fashionable and simple to single out well-known themes and suspect that they played a decisive role in Egypt and/or Tunisia; Malthusian trap, facebook, twitter - convenient and simple explanations.


Convenient and simple explanations are suspicious by definition in a complex world like ours. The typical ones applied to the Egyptian revolution don't pass simple tests and thus I reject them.

Fuchs, on the subject of convenient and simple explanations, I could not agree with you more. However, I never mentioned twitter, facebook or Malthus. On the contrary, I think that to find Malthus at work, you have to travel to Darfur, Rwanda or East Congo, not to Egypt.

However, when studying a revolution, it is obvious to analyze the issues that have to potential to mobilize large crowds. In Egypt, rising bread prices have been an incentive for social unrest on more than one occasion. This has been the case in 1977 and 2008. Actually, I do not understand why you are so adamant to reject the argument that someone's daily bread (literally) is a prime motivator for militant action. What simple tests allow you to do that?

[Entropy]

Would you please elaborate on this?
Those "missile gaps" were in part hoax (the one around '60), in part nonsense based on lack of logic thinking (the SS-20 scare). There was also no real bomber gap, ever - just a flimsy CONUS/Canada air defence and an almost worthless SM-1 naval air defence system.

The missile and bomber "gaps" were ultimately the result of a lack of information on Soviet capabilities. Until the U-2 and later the Corona program, there was little hard evidence for the numbers and production capabilities of Soviet bombers and later ICBMs. In this environment of information ambiguity, some within the US government took the Soviets at their word and came up with worst-case estimates of Soviet capabilities. Of course, politics was a big part of the picture too, as Senator's Symington and Kennedy used the supposed "gap" as a political issue against Eisenhower. In short, what began as incorrect assessments based on very limited information changed over time into what were clearly false claims as new information became available.

Although CIA estimates were lower than those from the USAF and others, they too were not accurate until intelligence from the U2 and Corona (both CIA programs at the time) began to provide some real data on Soviet capabilities. CIA estimates were changed based on the new information and, in hindsight, proved to be very accurate.