An engaging opine from Daanish Faruqi, a Senior Researcher, and Editor, at the Ibn Khaldun Center for Development Studies in Cairo. Faruqi’s opinion about the global food crisis defers markedly from the analysis of other scholars. Rather than blaming market dynamics and speculation, the onus, according to Faruqi, is on Egypt’s bad wheat policy. This really only applies to case of Egypt where government subsidies are fueling a black market for wheat. Government run bakeries are grossly mismanaged, inefficient and corrupt, and thus, the cheap wheat, which is for the poor, is siphoned off. While a few profit, ordinary Egyptians are increasingly having to deal with less bread in their diets. It does not appear that he is arguing against subsidies but rather the mismanagement of them.
This article was originally published in Daily News Egypt.
In a country with a growing economy and record-breaking foreign investment, the idea of a food crisis seems almost obsolete. Yet, on April 6, Egyptians from all walks of life united in a general strike, in solidarity with disgruntled factory workers in Mahalla, primarily over the most basic of commodities: bread.
The Egyptian Arabic term for bread, ‘aish, or ‘life,’ makes clear the centrality of bread to Egyptian life. Egyptians are a level-headed people, but try to compromise their ‘aish and they are quick to lose their tempers.
Unsurprisingly, the strike was ultimately suppressed by riot police, stationed en masse throughout Cairo to deter any meaningful attempt at peaceful protest. Nonetheless, the fact remains that an organic national movement mobilized, in a middle-income country, to demand basic foodstuffs.
How is this possible in a country awash with foreign aid and with a steadily growing economy? Sadly, few commentators to date bothered to identify the underlying problem, focusing instead on complicated market dynamics as being responsible for the current bread crisis.
The de rigueur analysis of the issue has gone something like this: the rising costs of oil -necessary to distribute foodstuffs throughout the country – coupled with a tripling of wheat prices since last summer, have spiked bread prices in Egypt to unaffordable levels. This in turn has put a monstrous strain on Egypt’s subsidized bread market, to the point that the government-subsidized bread supply can no longer keep up with the nation’s burgeoning demand. And voila, global market forces take their toll on the Egyptian marketplace, which – bolstered by popular support for worker’s rights in Mahalla -culminates in mass protest. Nothing President Mubarak or the NDP could have foreseen, such uncontrollable global economic forces, right?
But hold on a second. This is Egypt, a country that produces enough wheat to satisfy its bread requirements for at least six months. Moreover, despite the rising global costs of wheat, Egypt has more than enough hard cash on hand to satisfy the rest of its wheat needs by purchasing it on the open market. Something else must be at stake here. There is.
The heart of the matter lies in the gross mismanagement of Egypt’s subsidy program. I am by no means trying to diminish the severity of rising food prices globally, but the whip of the market alone in no way explains the Egyptian government’s inefficient subsidy system, or the rampant corruption therein. Run almost by caprice, Egypt’s subsidized bread program fails to monitor eligibility for subsidies, but instead sells subsidized flour to government bakeries, who then purport to use said flour to make cheap country – or baladi – bread, at a very marginal profit.
With no serious government management of the process beyond that point, the system is highly vulnerable to corruption, with struggling bakers selling subsidized flour on the black market for heftier profits – more than enough to buy off the underpaid inspectors appointed by the government to monitor subsidized bread prices. Consequently, affordable bread for the truly needy becomes scarcer, and with no serious monitoring efforts by the state, the process becomes cyclical, eventually culminating in a bona fide crisis.
Government mismanagement of simple provisioning, not uncontrollable market dynamics, led to this current state of affairs – bread queues at government bakeries, while flour meant to feed the poor is sold on the black market to make expensive pastries. And with nearly half of Egyptians living below the poverty line of $2 a day, mismanagement of their bread supply was enough to catalyze a truly national movement, despite its being suppressed by security forces.
It’s about time that President Mubarak and company wake up to the grim reality that the subsidy program is in serious need of reform. In deviating from the standard system of targeted food stamps to subsidize foodstuffs, Egypt’s handling of bread subsidies sets itself apart from functionally the rest of the world.
Fixing this mess, moreover, does not require reinventing the wheel; granted, setting up a targeted food stamp system for subsidized bread – much like the (admittedly imperfect) one presently in place for subsidized sugar and cooking oil for needy Egyptians – will take some time, and will require a more intense monitoring of income levels to determine eligibility for subsidies, but once established will end the black market profiteering rampant in the current system, and will more appropriately ensure affordable bread for the poor rather than underwrite the well-to-do.
The World Bank Report to Egypt in the 1960s specified clearly and unambiguously that Egypt’s policy of untargeted bread subsidies is both economically unsustainable and wholly inefficient at amply distributing resources to the poor, the ostensible mandate of the subsidy program in the first place.
Now, nearly 50 years later, perhaps it’s time that we give that suggestion some more serious consideration.
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