Spengler on Egypt: “It’s the price of wheat, stupid”

… so what do developments in Egypt have to do with the price of tea in Asia wheat on the worldwide market?

“Spengler” is the pen name for an erstwhile investment banker at Bank of America who is also a senior editor at First Things. Actually, his article, “Food and failed Arab states“, is a lot more nuanced than my title, and a must-read despite its length.

Even Islamists have to eat. It is unclear whether President Hosni Mubarak of Egypt will survive, or whether his nationalist regime will be replaced by an Islamist, democratic, or authoritarian state. What is certain is that it will be a failed state. Amid the speculation about the shape of Arab politics to come, a handful of observers, for example economist Nourel Roubini, have pointed to the obvious: Wheat prices have almost doubled in the past year.

Egypt is the world’s largest wheat importer, beholden to foreign providers for nearly half its total food consumption. Half of  Egyptians live on less than $2 a day. Food comprises almost half the country’s consumer price index, and much more than half of spending for the poorer half of the country. This will get worse, not better.

Not the destitute, to be sure, but the aspiring and frustrated young, confronted the riot police and army on the streets of Egyptian cities last week. The uprising in Egypt and Tunisia were not food riots; only in Jordan have demonstrators made food the main issue. Rather, the jump in food prices was the wheat-stalk that broke the camel’s back. The regime’s weakness, in turn, reflects the dysfunctional character of the country. 35% of all Egyptians, and 45% of Egyptian women can’t read.

The main cause, as he explains, is actually the growing prosperity of the big Asian countries: as their denizens become better off, they add more meat to their diet, and it takes about 7 pounds of grain to produce 1 pound of beef.

In this case, Asian demand has priced food staples out of the Arab budget. […] Asians are rich enough, moreover, to pay a much higher price for food whenever prices spike due to temporary supply disruptions, as at the moment.

Egyptians, Jordanians, Tunisians and Yemenis are not. Episodes of privation and even hunger will become more common. The miserable economic performance of all the Arab states, chronicled in the United Nations’ Arab Development Reports, has left a large number of Arabs so far behind that they cannot buffer their budget against food price fluctuations.

Earlier this year, after drought prompted Russia to ban wheat exports, Egypt’s agriculture minister pledged to raise food production over the next ten years to 75% of consumption, against only 56% in 2009. Local yields are only 18 bushels per acre, compared to 30 to 60 for non-irrigated wheat in the United States, and up 100 bushels for irrigated land.

The trouble isn’t long-term food price inflation: wheat has long been one of the world’s bargains. The International Monetary Fund’s global consumer price index quadrupled in between 1980 and 2010, while the price of wheat, even after the price spike of 2010, only doubled in price. What hurts the poorest countries, though, isn’t the long-term price trend, though, but the volatility.

People have drowned in rivers with an average depth of two feet. It turns out that China, not the United States or Israel, presents an existential threat to the Arab world, and through no fault of its own: rising incomes have gentrified the Asian diet, and – more importantly – insulated Asian budgets from food price fluctuations. Economists call this “price elasticity.” Americans, for example, will buy the same amount of milk even if the price doubles, although they will stop buying fast food if hamburger prices double. Asians now are wealthy enough to buy all the grain they want.

If wheat output falls, for example, due to drought in Russia and Argentina, prices rise until demand falls. The difference today is that Asian demand for grain will not fall, because Asians are richer than they used to be. Someone has to consume less, and it will be the people at the bottom of the economic ladder, in this case the poorer Arabs.

[…] Wheat supply dropped by only 2.4% between 2009 and 2010 – and the wheat price doubled. That’s because affluent Asians don’t care what they pay for grain. Prices depend on what the last (or “marginal”) purchaser is willing to pay for an item (what was the price of the last ticket on the last train out of Paris when the Germans marched on June 14, 1940?). Don’t blame global warming, unstable weather patterns: wheat supply has been fairly reliable. The problem lies in demand.

Obviously, if food constitutes 50% or more of your family budget (as appears to be the case for many poor Egyptians), doubling of food prices means privation if not outright hunger. “Spengler” is rather pessimistic, but does have one concrete policy recommendation that sounds like the most sensible thing I have read so far:

Under the title The Failed Muslim States to Come (Asia Times Online December 16, 2008), I argued that the global financial crisis then at its peak would destabilize the most populous Muslim countries[…] I was wrong. It wasn’t the financial crisis that undermined dysfunctional Arab states, but Asian prosperity. The Arab poor have been priced out of world markets. There is no solution to Egypt’s problems within the horizon of popular expectations. Whether the regime survives or a new one replaces it, the outcome will be a disaster of, well, biblical proportions.

The best thing the United States could do at the moment would be to offer massive emergency food aid to Egypt out of its own stocks, with the understanding that President Mubarak would offer effusive public thanks for American generosity. This is a stopgap, to be sure, but it would pre-empt the likely alternative. Otherwise, the Muslim Brotherhood will preach Islamist socialism to a hungry audience. That also explains why Mubarak just might survive. Even Islamists have to eat. The Iranian Islamists who took power in 1979 had oil wells; Egypt just has hungry mouths.

Read the whole thing

“Spengler”: Jewish donors outraged by 0bama

I generally advise caution about Israel National News (the online arm of the stridently pro-settler Arutz Sheva [“Channel Seven”] radio station), but the person being interviewed by Gil Ronen makes me sit up and take notice. David Goldman, a senior banking figure in real life, had a secret online life as the mysterious columnist “Spengler” in the Asia Times until he outed himself. He is currently the online editor of First Things magazine. The interview is an absolute must-read.

If senior journalist David Goldman is right, the correct word for describing the way a growing number of US Jews feel about President Barack Obama is not ‘anger’ but ‘rage’ – white-hot rage, at that, and a conviction that they have been swindled.[…] In his lecture [at Judea and Samaria College in Ariel], he quoted a top Jewish campaign donor who used the word ‘sociopath’ to describe Obama. In an interview with Israel National News, he predicted a possibly dramatic ‘train wreck’ for the Democrats in the November mid-term elections, with Jewish fundraising for Democrats drying up and a possibly high turnout of anti-Obama evangelical Christians.

INN: The recent McLaughlin group poll shows US Jewish support of Obama at about half its level in the 2008 election. Is this an accurate reflection of the mood among US Jews?

DG: When the American Jewish Committee conducted its annual poll of American Jewish opinion in February, just before Obama provoked the diplomatic crisis [over construction at Ramat Shlomo], 55% of respondents approved of Obama’s handling of relations with Israel, slightly less than the 57% that approved of the Netanyahu government. American Jews were under the mistaken impression that Washington and Jerusalem were on the same track. But 61% opposed any compromise on Jerusalem, while 75% agreed with the statement, “The goal of the Arabs is not the return of occupied territories but rather the destruction of Israel.” Support for Obama, in short, was a mile wide and an inch deep before he provoked the diplomatic crisis with Israel.

The outrage among Obama’s erstwhile Jewish supporters, reflected daily in Marty Peretz’s ‘The Spine’ blog at the New Republic, is heightened by the sense of wounded self-esteem felt by clever people who have just been swindled. I have spoken privately to several large Jewish contributors to Democratic campaigns who express a sense of outrage that I never have heard before. Jewish contributors to Democratic campaigns are selectively funding Republicans, for example Mark Kirk in Illinois, who is running for Obama’s Senate seat, as a warning. Democratic Congressmen trying to defend Obama have been booed off the dais of meetings at traditionally liberal Reform synagogues in several parts of the country. If the train wreck proceeds as program[m]ed, the change in attitude within the American Jewish community could be dramatic. [Emphasis mine – Ed.]

This also is reflected in the harsh tone with which centrist liberal Jews have criticized Obama–for example Abraham Foxman of the Anti-Defamation League of B’nai B’rith, Alan Dershowitz, and former New York Mayor Ed Koch.

INN: In the conference at Ariel you quoted contributors who used the word “sociopath.” Is this actually the word they used? What makes Obama’s broken promises different from the campaign double-talk we are used to from politicians?

DG: The actual phrase I heard from one important player in Jewish Democratic circles was, “Sociopath is too nice a word to describe Obama.” That was a Kiddush [festive synagogue event] conversation, so no names, of course. The difference is the magnitude and depth of the deception. In July 2008, the press was full of reports of Obama’s anti-Israel connections, including the fact that his foreign policy advisor in his Senate office was the odious Samantha Power – who proposed international military intervention to end the ‘Israeli occupation’ – as well as Zbigniew Brzezinski, who was an official campaign spokesman, along with many others.

Obama gave assurances to the Jewish community which were so persuasive that Martin Peretz announced in his ‘Spine’ blog that Obama could be trusted. Brzezinski and Power were shown the door (Power after she made inappropriate remarks about Hillary Clinton) and the Jewish community was satisfied that Obama was as reliable as, say, Bill Clinton. Obama has extraordinary gifts of persuasion, and has been profligate about employing them. He persuaded some very wealthy and sophisticated people that he was on their side, and then turned on them.

INN: Ed Koch has predicted the Democrats will suffer a ‘tsunami’ in November. If this scenario materializes, how much pressure would this create on Obama to change his Middle East policies?

DG: The President, not Congress, controls foreign policy. That said, politics is always a factor – but it is not the only factor.

Many observers are predicting a crushing defeat for the Democrats in November. Dick Morris, the former Clinton advisor and Fox News commentator, claims that the Republicans will take both Houses of Congress. The fact that Democratic fundraising among Jews will be a tough sell contributes to the problem, but is not a decisive factor; there are enough other reasons for the Democrats to lose, starting with high unemployment and the fact that Obama has failed to create any middle ground with the Republicans and is perceived as too far too the left to suit the national mood. Obama almost certainly has resigned himself to a bad interim election; his best play is to spend the next two years running against a ‘do-nothing’ Republican Congress in the hope of winning a second term in 2012.

If Obama attempts to impose a settlement on Israel prior to the November elections, it will give the Republicans a stick with which to hit him. American support for Israel is running at all-time highs, with 64% supporting Israel according to Gallup vs. 18% sympathy for the Palestinian Arabs. And if he forces a crisis in diplomatic relations with Israel, it will become a significant factor in 2012. Not only will Jewish fundraising dry up (with some going to Republicans), but evangelical Christian support for Israel may become a factor. The evangelicals are an amorphous movement without centralized leadership, and the big question regarding their weight in elections is turnout. If they are highly motivated by an issue close to their concerns – and Israel is such an issue – they can be an important factor. Evangelicals comprise roughly 28% of the electorate, and a big change in turnout could shift 2% to 3% of the national vote to the Republicans – probably a winning margin.

That is why many Democrats are warning Obama against pursuing a confrontational strategy with Israel. The degree of Obama’s ideological fervor in support of conciliating the Muslim world surprised the political world, as did the ferocity of his diplomatic approach to Israel. It is hard to avoid the conclusion – which I have long believed – that Obama has a profound personal commitment to reconciling America with the Muslim world which will override the usual political calculus. Given that he had a Muslim father and stepfather, was raised for four years in Indonesia, and has written with passion about his sympathy for the traditional identity of Indonesian Muslims, this is not surprising.

Obama’s personal impulses are in conflict with his evident political interests, and it is impossible to predict how things will work out. There are other considerations as well. American troops are supposed to start leaving Iraq in the summer, and the country well might explode. Iran will make progress towards acquiring nuclear weapons, and reinforce its presence in Iraq, Gaza, Lebanon and elsewhere. Obama’s policy in the region may blow up in his face in the advent of the November elections. He has some incentive to make Israel the scapegoat for this failure, by arguing that if only Israel were reasonable in dealing with the Palestinians, the US could win Muslim support in other parts of the region. This is entirely specious, in my view, but the probability is that Obama will stick to his guns.

Read the whole thing. Perhaps American Jews are waking up from the Kool-Aid after all. It is high time that 0bama gets reminded of Lincoln’s Iron Law: “You can fool some of the people all of the time; you can fool all of the people some of the time; but you cannot fool all of the people all of the time.”

The “what is Barack Obama” debate?

Michael Ledeen discusses the debate that broke out between David Goldman (a.k.a. “Spengler”) and John Podhoretz on exactly what is Barack 0bama. Ledeen himself takes a middle position, but feels Podhoretz should have done better fact-checking. We link, you decide — it’s a good read.