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General Financial News
Egypt confronts a Tunisian situation
Jan 26, 2011 10:02 AM
In the wake of Tunisia's sudden, unexpected popular revolution, autocratic regimes across the Arab world are running scared. In Cairo, the U.S.-backed presidency of Hosni Mubarak has perhaps the most to lose.
Yesterday, massive crowds gathered in Cairo's Midan Tahrir, the political and economic heart of the city that's bordered by the Mogamma (the central government building), the Egyptian Museum, the headquarters of the Arab League and the Nile Hilton hotel.
The motivations behind the January 25 protest, which was partly organized through social networking sites like Twitter and Facebook, are strikingly similar to those that pushed the Tunisian people to take to the streets. While the catalyzing event for Tunisia came in the form of an impoverished vegetable seller's suicide by self-immolation to protest the regime's injustice, the Egyptians seem to have been motivated by the Tunisians themselves.
The protestors' concerns are manifold, but the two main problems are political and economic. On the one hand, the Egyptian state is notoriously overbearing, corrupt and sclerotic. Elections are essentially a sham, and public confidence in both the ruling and opposition parties is basically zero.
On the other hand, the average Egyptian is being squeezed by implacable economic forces. In 2007 and 2008, the country was wracked by riots over the rising price of bread and other staples. The same factors are once again coming into play, as inflation hit an annual rate of 10.3 percent in the last month.
Jack Shenker, a reporter from the United Kingdom's Guardian newspaper, experienced the visceral impact of the protests firsthand after he was arrested and beaten by security services in Cairo as he attempted to cover the events.
"This is the first day of the Egyptian revolution," Karim Rizk, an Egyptian citizen at one of the Cairo rallies yesterday, told Shenker. "We have taken back our streets today from the regime, and they won't recover from the blow."
The largest riots in Egypt's history took place in 1977, when hundreds of thousands streamed into the streets to protest against President Anwar Sadat's cut in food subsidies. The reaction from the regime was brutal, but after three days, Sadat backed down and restored the subsidies.
If Mubarak tries to follow suit and appease the protesters' concerns with cheaper grain, the world's largest importer of wheat may have to step up its purchases. Indeed, grain futures surged on Wednesday in expectation of further wheat purchases from Egypt, Jordan and other countries which supply their populations with subsidized bread.
March 2011 wheat futures jumped 16.75 cents to $8.55 per bushel, while corn futures for March delivery gained 12.25 cents to $6.5625 per bushel. Soybean futures for March delivery climbed 9.75 cents to $13.8425 per bushel.
"Importers are rushing into the market," Ker Chung Yang, an analyst in Singapore with Phillips Futures, told Bloomberg / Businessweek. "What happened in Egypt, Tunisia and Jordan will prompt neighboring countries to import more wheat to contain food inflation."
From a broader political standpoint, however, simply boosting food supplies and trying to address the basic problem of rising food prices may not be enough to stem the discontent. Egypt is heavily backed by the United States and more quietly supported by neighboring Israel - but Tunisia also cooperated with the U.S., which did not step in to save ex-president Ben Ali.
In addition, the price of food isn't the only problem - persistent unemployment and widespread poverty in both urban and rural areas have sapped the country's economic strength. Already the scale of the suppression is stepping up, as the Guardian reports that over 850 protesters have been arrested.
As food commodity prices continue to rise globally and economic volatility increases, it's highly likely that more countries in the Middle East and beyond will experience similar levels of popular unrest.
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