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Thursday, January 27, 2011
Arab dictatorships inundated by food price protests
By Salman Ansari Javid
Soaring food prices have forced people in many Arab states to allocate a larger portion of their income to the basic necessities of life pushing them deeper into poverty and sparking protests.
Widespread rallies last week in Algeria and Jordan demonstrated the public discontent about the economic situation that could have political repercussions. In the case of Tunisia, a 23-year-old dictatorship was overthrown.
In Egypt, inspired by the “Jasmine revolution” in Tunisia, tens of thousands of people took to the streets on Tuesday and Wednesday despite government warnings.
Protesters sang the national anthem and carried banners denouncing President Hosni Mubarak, who has been in power for nearly 30 years. Rallies in Cairo and Alexandria were planned with the motto as “the day of revolution against torture, poverty, corruption and unemployment.”
Egypt bans demonstrations without prior permission, and clashes erupted and rallies were broken leaving three dead.
Food prices helped spark riots in Algeria earlier this month, forcing the government to cut import duties and taxes on sugar and cooking oil. Jordan cut fuel taxes and imposed price caps on sugar and rice to preempt unrest. Russia banned wheat exports last year after a poor harvest.
Prices for rice, world's most important and politically sensitive grain, have risen in the past six months, but remain well below 2008 highs.
A similar food price crisis in 2008 led to protests and riots in more than 30 countries.
The Food and Agriculture Organization’s food price index, which tracks the price of a basket of cereals, oilseeds, dairy, meat and sugar, hit an all time high of 215 points last month, up from 206 in November. The Rome-based agency’s index stood at only 90 in 2000 and it did not break through the 100 mark until 2004.
Escalating food prices along with diminishing government subsidies are hitting hard the people, especially the poor.
The main reason behind the food price increases is on the supply side which cannot be altered in a short term. The main culprits behind the shortage: climate change (resulting in drought and unseasonal rains), rising temperature, use of food crop to produce fuel, and conversion of farmland into industrial and urban use.
“About one-degree Celsius average global temperature rise, you lose ten percent of the supply, global grain production, rule of thumb,” said journalist Gwynne Dyer, author of “Climate Wars: The Fight for Survival as the World Overheats.”
Another factor that has aggravated the problem is the global population increase, especially the expansion of the middle class, with higher consumption, in emerging markets.
Analysts have also cited U.S.’s cheap dollar policy, resulting from the second stimulus which is also called Quantitative Easing or (QE2). U.S. Treasury injected $600b in the U.S. economy recently. Such stimulus package has flooded the emerging markets with red hot money, pushing inflation even higher.
Some point to low interest rates in the U.S., Japan and Europe, as investors use cheap financing to invest in globally traded commodities such as rice, sugar, cotton and oil, driving the prices higher.
Low income economies are more sensitive to food inflation as the poor spend a higher percentage of their incomes on food. Demonstrations like the ones taking place in Egypt, where half of some 80 million people live on $2 per day, are spreading like wildfire threatening the Western backed dictatorships.
The U.S. administration is helplessly watching the situation as dictators, which it has backed for decades, are overthrown or on the verge.
Sooner or later we will have to add these dictators to the list of the endangered species. The sooner the better