08 June 2011

Egypt's Revolution: Not About the Price of Food?

This post follows up the discussion here earlier this week about uncertainties in measurements of food security.  The graph above comes from The Economist and the accompanying text offers a rather subtle corrective to conventional wisdom (such as this and this and this):
[F]ood prices in local currency soared in the year to December 2010 in countries like El Salvador, Venezuela, Iran and Morocco. Food was cheaper in December 2010 than a year earlier in places like India, Egypt and Ghana.
So while food prices were much higher in early 2011 than 2005, it seems difficult to argue that they were a proximate cause of the unrest and revolution in Egypt, if food prices were actually lower than a year earlier (see figure above).  This perspective was actually reported at the time, such as by the WSJ:
In Egypt, food is a highly political issue. The world’s biggest wheat importer, where one in five people lives on less than $1 a day, provides subsidized bread for 14.2 million people.

United Nations figures showing world prices pushed above their highs of three years ago in December has sparked a wave of unease throughout the heavily import-reliant region as governments looked to stave off domestic inflation.

Yet Daniel Williams, a worker for Human Rights watch who has been living in Egypt for seven years, said food inflation has played only a minor role in the current discontent. “For someone poor trying to feed a family of four children here has always been difficult,” he said.

“If you look at who’s actually out there it’s all segments of society. The bloggers, the people who are driving this, they are mainly middle-class kids. In middle-class neighborhoods you sense people are holding their breath in the way you don’t in the poorer neighborhoods.”

Liliana Balbi, senior economist at the Food and Agriculture Organization, agreed. “Definitely this unrest is not related to soaring food prices in general”
As the saying goes, conventional wisdom is often neither.

1 comments:

Hector M. said...

I concur with Ms Balbi of the FAO (she is a brilliant analyst of the world food situation, whom I know personally from my work as a consultant with FAO).
Practically all countries in Northern Africa and the Middle East have staple food heavily subsidized, at enormous fiscal cost, and most keep stabilization stocks in the hands of the government besides controlling foreign trade in this (and other) goods. Thus the retail cost of flour or bread is in effect decoupled from the international price of wheat. Besides, as I mentioned in my comment at the previous thread on this matter, even without any subsidies the international price of wheat grain represents only a small fraction (about 15%) of the cost of bringing bread to retail level.
Nonetheless, the fiscal cost of the subsidies has been growing steadily in recent years due to the increase in international commodity prices, and therefore in some countries the retail price has increased as well (i.e. above the general level of inflation), causing a small increase in the proportion of people with limited access to food. However, this reduction operates mainly on non-staple food demand, as people prefer reducing their consumption of, say, eggs or fruit than reducing bread or flour.

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