Saturday, September 15, 2012

It's the food prices, stupid

Once again the world is shocked to see how quickly unrest can erupt across the Muslim world, spreading almost overnight into numerous nations: Tunisia, Egypt, Sudan, Yemen, Pakistan, etc. The trigger this time happened to be an idiotic YouTube post called Innocence of Muslims which pokes fun at Prophet Muhammad and the origins of Islam.
Time: - In a saner world, the trailer for Innocence of Muslims would get no response other than as an example of terrible filmmaking. The 14-minute video, purporting to be excerpted from a larger movie propagandizing present-day Muslims and the life of Muhammad, is confoundingly bad, filled with incongruous accents, haphazard cuts, ludicrous dialogue and green-screen so bad that the actors appear to be floating in the air. 
But how is it that this fringe video could suddenly generate this much hatred and violence - taking numerous lives in the process? The answer is that just as Arab Spring had little to do with zeal for democratic freedom (discussed here), these new violent protests have little to do with a new surge in anti-American sentiment (which has been strong for generations).

The unfortunate reality is that this unrest in numerous Muslim nations (as predicted here) is driven, far more than anything else, by the rise in food prices across the region. This is the same phenomena that toppled brutal dictators who were able to cling to power for decades.
The Economist: - “The food-price spike was the final nail in the coffin for regimes that were failing to deliver on their side of the social contract,” says Jane Harrigan of London's School of Oriental and African Studies.
And once again these price increases bring about severe hardships among the populations of these nations (that are difficult for people in the developed world to fully appreciate), fueling unrest and hatred.
Ahram: - As the United Nations issues warnings over soaring global food prices, Egypt may have more to worry about than most. A net food importer and the world's biggest consumer of foreign wheat, the Arab world's most populous country would be wise to keep an eye on consumer prices indices as well as its budget, say experts.

In late August, three UN agencies made a joint statement suggesting the world could be on the brink of a repeat of the 2007-8 food crisis, citing "sharp increases" in the prices of maize, wheat and soybean caused by summer droughts and scorched crops across the globe.

Global food prices soared a monthly 10 per cent in July, the World Bank said in August as it warned of the effect on domestic prices.

"Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly," the Bank said.
The situation described above is by no means unique to Egypt. Of course the danger going forward is that agricultural commodity prices will stay elevated. What the Great North American Drought had started, the Fed will continue (via monetary expansion), as food inflation is exported globally. And someone will be blamed - if not the local dictators, it will be the US. This (and not any YouTube video) will ultimately translate into dangerous geopolitical uncertainties and further hardships and loss of life.

Diapason Global Agriculture Price Index (Bloomberg)
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