No, Egypt doesn\’t need more socialism

That\’s what it needs to get away from:

Much of the old regime is still in place in Egypt – the Popular Alliance\’s aim is to make people aware of alternatives

So what alternatives are those then?

Labour movements are continuing the revolution today. Their flagship cause has become the ongoing strikes in Shubra el-Kom, where disgruntled textile workers are calling for the nationalisation of their factory, which was sold to Indonesian owners at a fraction of its value in an example of the institutional corruption fostered by Mubarak.

The Popular Alliance has seized upon this, using the protests as a recruiting ground – highly effectively – and identifying itself with the struggle. Should the workers be triumphant, it would set a precedent for public ownership of hundreds more companies, while cementing the socialists as the workers\’ representatives.

The Alliance has built on union demands to advocate a raft of populist reforms such as subsidised housing for the poor, free education and greater local representation through city presidents. These connect neatly with the core demands of the revolution for social justice, freedom and democracy, which will have cross-demographic appeal.

Facepalm.

These are exactly the problems that face the Egyptian economy: the remains of Nasser\’s Arab Socialism.

What you don\’t nationalise you subsidise and the economy goes to cock.

Whether or not the UK needs more free markets is arguable ( I certainly think so but that\’s me) but what the Egyptian economy needs is to privatise huge swathes of the economy, reduce or eliminate subsidies.

For example, the government subsidises the price of bread.

Bread has stayed cheap even as Egypt\’s other food prices leaped upward by 17 percent last year – cheap because the government pays for most of it.

Twenty of the flat, round pieces of local \”eish\” – \”life\” in Arabic, the word Egyptians use for the staple – cost just one Egyptian pound. That\’s the equivalent of 17 U.S. cents for more than 2 kilograms (more than 5 pounds) of bread.

….

\”Without the subsidy, it would triple the price,\” said Abdul Elah H. al-Hamawi, president of the bakers\’ association in nearby Jordan. \”There would be a revolution!\”

….

Under the half-century-old system, a \”safety net\” for Egypt\’s poor, the government sells cut-rate wheat flour to bakeries for mandatory production of \”baladi,\” or local, bread.

\”Bread inspectors\” enforce the mandate, but leakage still occurs, as unscrupulous bakers siphon off flour to sell at higher rates to producers of finer, unsubsidized baked goods. Subsidized bread also \”leaks\” to better-off Egyptians, since anyone can buy it.

….

From wheat self-sufficiency, Egypt has become the world\’s biggest wheat importer. The government buys more than half the country\’s needs on the international market. A decade ago, the basic market cost for those imports was about $700 million a year. This year it could top $3.5 billion, for 10 million tons of wheat.

In Jordan, 99 percent dependent on imports, \”our budget has been increasing about 10 to 12 percent a year for the subsidies,\” Emad A. al-Tarawneh, that government\’s chief wheat importer, said in Amman.

Although global grain prices dropped in recent weeks because of world events, \”our prediction is that prices will continue to go up, same as in 2008,\” he said.

Here in Cairo, the agronomist known as the \”father of Egyptian wheat\” for his work improving the local crop, said the subsidy should end.

\”Otherwise the government cannot afford it all,\” Abdel Salam Gomaa said. \”And the rich are benefiting more than the poor. They don\’t buy to consume but to feed the cattle and animals\” – with bread cheaper than animal feed.

If people are too poor to buy food then you give them money to buy food. You don\’t go around making bread a third of the real price, for that introduces all sorts of distortions into the food supply.

What Egypt needs is less of this sort of idiot socialism, not more.

10 thoughts on “No, Egypt doesn\’t need more socialism”

  1. But that system failed and therefore, as every good socialist will tell you, if it failed it can’t have been proper socialism.

  2. We give poor people money to buy food and they spend it on drugs.

    Not at all clear to me that subsidising bread is worse.

  3. wheat futures are up around $8 a bushel, which is quite a lot compared to the $3 wheat of last spring – this appears to be a mixture of falling dollar, bi-fuel subsidy & China & India getting richer but it spells very bad news for Egypt.

  4. The Pedant-General

    My sources also tell me that the Saudis are also a bit nuts on bread.

    The government controls all flour imports – bakeries have to buy from the government. so far so bad, but the Saudi govt, in its infinite wisdom, imports only a single type/grade of flour.

    Try making bread with ordinary flour, or cakes with strong bread flour, and you’ll see what a nightmare that creates….

  5. The bread thing is ridiculous.

    Not so sure about the factory, though: if the factory was government-owned, and I’m the President’s mate and bought it from the government for 5op, and this is provable in civil court, then giving me back 50p and confiscating my factory seems fair enough. I pretty much stole it from the people, after all.

    Immediately selling it to someone else non-corrupt at market price, or to the workers to run as a co-op at a discount to market price, would both be much better ideas than trying to run it as a government industry, of course.

    We give poor people money to buy food and they spend it on drugs

    And, if the price of drugs wasn’t ridiculously artificially inflated by governments’ decision to effectively grant a monopoly on their supply to violent criminals, that’d be fine: enough heroin to keep someone high for a year costs about a grand at industrial prices.

  6. fjfjfj,

    If someone spends their bread money on drugs, then that person suffers.

    If the Government subsidises bread until it is cheaper to feed to animals than animal feed, every tax-payer suffers.

  7. Egypt was last self-sufficient in wheat ca. 1950. Its population then was about 20 million. Last figures I know (2006) showed a pop of +71 million. Who are you kidding that subsidy is itself the problem?

  8. Having lots of poor people is always handy when you need soldiers . And the need for soldiers – loyal soldiers- often comes on unexpectedly.
    Modern ‘professional armies’ are seldom sufficient.

  9. Egypt was last self-sufficient in wheat ca. 1950. Its population then was about 20 million. Last figures I know (2006) showed a pop of +71 million. Who are you kidding that subsidy is itself the problem?

    So what? If the Egyptian economy generates enough income to import bread at any likely bread price, that’s irrelevant. Just as the fact that Germany doesn’t have any oil at all doesn’t stop Germans driving around in their BMWs…

  10. It’s not “their” bread money in your example. It comes from the taxpayer just as the bread subsidy money comes from the Egyptian taxpayer. The effect on the taxpayer is the same: they lose the money. The question is what effect each form of welfare provision has on society.

    The fact that subsidising bread may lead to the waste of bread is… a shame. But is it worse than the enormous moral hazard and waste of human labour created by money dole?

    I don’t know, and without knowing more about Egypt than I or (I would guess) you currently do, we’re not going to find out.

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