by Joe Shea
February 11, 2011
IN LIBERATION SQUARE, EGYPTIANS CHEER FREEDOM AT LAST
DUMMERSTON, Vt. -- If you want to know why there was a revolution in Tunisia, why a revolution is in progress in Egypt and why several other governments elsewhere around the world are now balanced on a knife edge, consider these factors.
The International Labor Organization (ILO) says more than 205 million people worldwide are out of work, and 76 million of that number are young people under age 30. In the Middle East, the ILO says the unemployment rate averaged 10.2 percent in 2010. For young people, it was 23.6 percent. In Tunisia, the unemployment rate is 14 percent, and in Egypt, it is 9.7 percent.
That factor is significant, but consider this. Food prices worldwide are at their highest levels since the 2007-08 food crisis that sparked riots in dozens of nations around the world. Wheat prices have risen 70 percent over the past year. Corn prices are up about 50 percent, and soybeans are up about 40 percent.
This is bad news for a country such as Egypt, which must import more than half its food supply. Its households spend, on average, 38.3 percent of their incomes on food. Forty percent of Egyptians struggle to earn the World Bank's poverty level wage of $2 per day.
While there are other factors at work behind the spreading unrest in North Africa and the Middle East - corrupt authoritarian governments, social disenfranchisement, uneven economic development - soaring food prices and persistent unemployment are the main causes.
So let's take a closer look at food prices. Why are they rising?
Some of it is weather-related. Floods in Australia and Pakistan and drought in Brazil, Argentina, Ukraine and Russia have damaged crop production. And, yes, global warming is playing a major role in the volatile weather that is affecting some of the world's biggest food producers.
Some of it is demand-related. Emerging markets such as China, India and Brazil are buying more food than ever before, and some grain production is being diverted from food to biofuels like ethanol.
And some of it is related to speculation. The same banks, hedge funds and financiers who nearly brought down the world's economy in the sub-prime mortgage bubble are now driving up commodity prices.
The now-defunct Lehman Brothers investment bank did a study that found that index-fund speculation rose from $13 billion in 2003 to $260 billion in 2008. And, not surprisingly, food prices rose just as sharply during that period. It is estimated that roughly two-thirds of all wheat contracts were held by speculators with no interest at all in owning real wheat.
During the 2007-08 price spikes, hard red wheat went from its usual trading range of $3 and $6 per bushel to as high as $25 per bushel. And prices weren't rising then because there was a shortage of wheat. Global wheat production actually increased during the same period.
Some countries are trying to beat the speculators in the current price run-up by stockpiling wheat, corn and other staples, but that may have the unintended effect of driving prices higher.
The ILO is pointing out the obvious when it recommends that governments should focus on creating quality jobs and strengthening social protections, rather than obsess over deficits. Unfortunately, most governments worry more about pleasing the bankers and the financial markets than about easing the economic pain of their citizens.
There is also one powerful remedy that could take care of the food problem as well as the employment problem - encouraging small-scale agriculture. Right now, there are between 400 and 500 million farmers in the world who cultivate less than 5 acres of land. Yet these small farmers produce half of all the world's food.
Adopting policies that help small farmers - improving infrastructure, strengthening local markets, ensuring access to credit and building better food storage - would go long way toward making countries more agriculturally self-sufficient.
Hungry, jobless people who feel they don't have a future are the fuel of revolutions. That's what happened in Tunisia. That's what's happening in Egypt. And that is the future for other countries with a restive and impoverished citizenry, such as Jordan, Yemen, Sudan, Syria and Algeria, that want a better life and are sick of the repressive kleptocracies that rule them.
Randolph T. Holhut has been a journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at email@example.com.