July 15, 2011, 6:57 AM
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It was seven months ago that Mohammed Bouazizi, a vegetable peddler in Tunisia set himself and the Arab world on fire. The 26-year-old staged his suicidal protest on the steps of the local city hall after a municipal inspector took away his unlicensed vegetable cart thus denying him the ability to feed his family of eight.
Most depictions of the Arab revolutions that followed his act have cast them as struggles for freedom and good government. These depictions miss the main cause of these political upheavals. No doubt millions of Arabs are upset about the freedom deficit in Arab lands. But the fact is that economics has played a decisive role in all of them.
In Bouzizi's case, his self-immolation was provoked by economic desperation. And if current trends continue, the revolutionary ferment we have seen so far is only the tip of the iceberg. Moreover, the political whirlwind will not be contained in the Middle East.
Most of the news coming out about Egypt today emanates from Cairo's Tahrir Square. There the protesters continue to demand ousted president Hosni Mubarak's head on a platter alongside the skulls of his sons, business associates, advisors and everyone else who prospered under his rule. While the supposedly liberal democratic protesters' swift descent into bloodlust is no doubt worth noting, the main reason these protesters continue to gain so much international attention is because they are easy to find. A reporter looking for a story's failsafe option is to mosey on over to the square and put a microphone into the crowd.
But while easily accesible, the action at Tahrir Square is not Egypt's most important story. The most important, strategically consequential story is that Egypt is rapidly going broke. By the end of the year, the military dictatorship will likely not only default on Egypt's loans. Field Marshal Tantawi and his deputies will almost certainly be unable to feed the Egyptian people.
Some raw statistics are in order here.
Among Egypt's population of 80 million, some 32 million are illiterate. They engage in subsistence farming that is too inefficient to support them. Egypt needs to import half of its food from abroad.
As David Goldman, (aka Spengler), reported in Asia Times Online, in May the International Monetary Fund warned of the impending economic collapse of non-oil exporting Arab countries saying that, "In the current baseline scenario the external financing needs of the region's oil importers is projected to exceed $160 billion during 2011-13."
Goldman noted, "That's almost three years' worth of Egypt's total annual imports as of 2010."
Since Mubarak was overthrown in February, Egypt's foreign currency reserves have plummeted from $36bn to $25-28bn. Last month Tantawi rejected an IMF loan offer of $3bn. claiming he would not accept any conditions on the loans. Instead he accepted $4bn in loans from Saudi Arabia and another $2.34bn from the Gulf States.
And still, Egypt's foreign currency reserves are being washed away. As Goldman explained, the problem is capital flight. Due in no small part to the protesters in Tahrir Square calling for the arrest of all those who did business with the former regime, Egypt's wealthy and foreign investors are taking their money out of the country.
At the Arab Banking Summit in Rome last month, Jordan's Finance Minister Mohammed Abu Hammour warned, "There is capital flight and $500 million a week are leaving the Arab world."
According to Goldman, "Although Hammour did not mention countries in his talk... most of the capital flight is coming from Egypt, and at an annual rate roughly equal to Egypt's remaining reserves."
What this means is that in a few short months, Egypt will be unable to pay for its imports. And consequently, it will be unable to feed its people.
EGYPT IS far from alone. Take Syria. There too, capital is fleeing the country as the government rushes to quell the mass anti-regime protests.
Just as Egyptian and Tunisian protesters hoped that a new regime would bring them more freedom, so the mass protests sweeping Syria owe in part to politics. But like the situation in Egypt and Tunisia, Syria's economic woes are dictating much of what is happening on the ground and will continue to do so for the foreseeable future.
Last month Syrian President Bashar Assad gave a speech warning of "weakness or collapse of the Syrian economy." As a report last month by Reuters explained, the immediate impact of Assad's speech was capital flight and the devaluation of the Syrian pound by eight percent.
For the past decade, Assad has been trying to liberalize the Syrian economy. He enacted some free market reforms, opened a stock exchange and attempted to draw foreign investment to the country. While largely unsuccessful in alleviating Syria's massive poverty, these reforms did enable the country a modest growth rate of around 2.5% per year.
In response to the mass protests threatening his regime, Assad has effectively ended his experiment with the free market. He fired his government minister in charge of the economic reforms and put all the projects on hold. Instead, according to a report this week in Syria Today, the government has steeply increased public sector wages and offered 100,000 temporary workers full-time contracts. The Syrian government also announced a 25% cut in the price of diesel fuel at a cost for the government of $527 million per year.
Boasting foreign currency reserves of $18bn, the Syrian regime announced it would be using these reserves to pay for the increased governmental outlays. But as Reuters reported, the government has been forced to spend $70-80 million a week to buck up the local currency. So between protecting the Syrian pound and paying for political loyalty, the Assad regime is quickly drying up Syria's treasury.
In the event the regime is overthrown, a successor regime will face the sure prospect of economic collapse much as the Egyptian regime does. And in the event that Assad remains in power, he will continue to reap the economic whirlwind of what he has sown in the form of political instability and violence.
What this means is that we can expect continued political turmoil in both countries as they are consumed by debt and tens of millions of people face the prospect of starvation. This political turmoil can be expected to give rise to dangerous if unknowable military developments.
POOR ARAB nations like Egypt and Syria are far from the only ones facing economic disaster. The $3bn loan the IMF offered Egypt may be among the last loans of that magnitude the IMF is able to offer because quite simply, European loaners are themselves staring into the economic abyss.
Greece's debt crisis is not a local problem. It now appears increasingly likely that the EU is going to have to accept Greece defaulting on at least part of its debt. And the ramifications of Greek default on the European and US banking systems are largely unknowable. This is the case because as Megan McArdle at The Atlantic wrote this week, the amount of Greek debt held by European and US banks is difficult to assess.
Worse still, the banking crisis will only intensify in the wake of a Greek default. Debt pressure on Italy, Ireland, Spain and Portugal which are all also on the brink of defaulting on their debts will grow. Italy is Europe's fourth largest economy. Its debt is about the size of Germany's debt. If Italy goes into default, the implications for the European and US banking systems - and their economies generally -- will be devastating.
The current debt-ceiling negotiations between US President Barack Obama and the Republican Congressional leadership have made it apparent that Obama is ideologically committed to increasing government spending and taxes in the face of a weak economy. If Obama is reelected next year, the dire implications of four more years of his economic policies for the US and global economies cannot be overstated.
DUE TO the economic policies implemented by Prime Minister Binyamin Netanyahu since his first tenure as prime minister in 1996, in the face of this economic disaster, Israel is likely to find itself in the unlikely position of standing along China and India as among the only stable, growing economies in the world. Israel's banking sector is largely unexposed to European debt. Israel's gross external debt is 44 percent of GDP. This compares well not only to European debt levels of well over 100 percent of GDP but to the US debt level which stands at 98 percent of GDP.
Assuming the government does not bend to populist pressure and take economically hazardous steps like reducing the work week to four days, Israel's economy is likely to remain one of the country's most valuable strategic assets. Just as economic prosperity allowed Israel to absorb the cost of the Second Lebanon War with barely a hiccup, so Israel's continued economic growth will play a key role in protecting it from the economically induced political upheavals likely to ensue throughout much of the Arab world and Europe.
Aside from remaining economically responsible, as Israel approaches the coming storms it is important for it to act with utmost caution politically. It must adopt policies that provide it with the most maneuver room and the greatest deterrent force.
First and foremost, this means that it is imperative that Israel not commit itself to any agreements with any Arab regime. In 1977 the Camp David Agreement with then Egyptian president Anwar Sadat in which Israel surrendered the strategically invaluable Sinai for a peace treaty seemed like a reasonable gamble. In 2011, a similar agreement with Assad or with the Palestinian Authority, (whose budget is largely financed from international aid), would be the height of strategic insanity.
Beyond that, with the rising double specter of Egyptian economic collapse and the rise of the Muslim Brotherhood to power, Israel must prepare for the prospect of war with Egypt. Recently it was reported that IDF Chief of General Staff Lt. Gen. Benny Gantz has opted to spread over several years Israel's military preparations for a return to hostilities with Egypt. Gantz's decision reportedly owes to his desire to avoid provoking Egypt with a rapid expansion of the IDF's order of battle.
Gantz's caution is understandable. But it is unacceptable. Given the escalating threats emanating from Egypt - not the least of which is the expanding security vacuum in the Sinai -- Israel must prepare for war now.
So too, with the US's weak economy, Obama's Muslim Brotherhood friendly foreign policy, and Europe's history of responding to economic hardship with xenophobia, Israel's need to develop the means of militarily defending itself from a cascade of emerging threats becomes all the more apparent.
The economic storms may pass by Israel. But the political tempests they unleash will reach us. To emerge safely from what is coming, Israel needs to hunker down and prepare for the worst.
Originally published in The Jerusalem Post.
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I would never have known the story of Mohammed Bouazizi, and his confiscated vegetable cart if you hadn't told me. Damn shame, Seems that things are the same the world over. A guy wants to feed his family, make a life, and a government official takes his property, his dream, his means to that end, away. Because he must pay for permission to live and pursue that those ends.
I pray that the official's end has found him but perhaps not so quickly.
Caroline, you have certainly presented most ominous news. All the signs have been there for some time of the world slowly imploding and all the violence and greed in the Middle East only hastening the process. Israel is being challenged now both by her position as an "oasis of peace" in the midst of a storm and the fact that she will be one of only a few countries still able to feed her population amid massive starvation. It stands to reason that we cannot sit back and wait for events to unfold, but must be in a state of preparedness now for the rough times ahead. We alone with Hashem's help are responsible for our continued existence. Shabbat shalom and blessings.
Wrath is cruel, and anger is outrageous; but who is able to stand before envy?
Proverbs 27
As the global economy of ALL the nations who seek to carve up Israel continues to meltdown and their misery and suffering grows deeper they will see Israel sitting prosperous and blessed.
It's amazing to see the once great empire America collapse and decay the more Washington attempts to carve up Israel and divide Jerusalem for a totally unnecessary 23rd Arab despot state.
Who in their right mind can be an athiest in this day ?
The enemies of Israel will for the most part be blind and unable to connect that what they have intended for Israel to their own downfall,but their ability to envy and be jealous against prosperous and blessed Israel will only grow into uncontrolled rage,blame and revenge.
Israel's close neighbors are experts in this field.
The curse they brought upon themselves by their hatred, violence and evil desires,jealousy and the lying, blame game will only grow and we know where this all leads.
It's evident that Israel's God has intensified the Genesis 12:3 curse level on Israel's close and distant neighbors and is emptying their busy calendars,bank accounts and dinner plates in order to gather them for their final appointment to cure their hate and bloodlust against Israel and the Jewish people for good.
'I will also gather all nations, and will bring them down into the valley of Jehoshaphat, and will plead with them there for my people and for my heritage Israel, whom they have scattered among the nations, and parted my land.'
Joel 3
There is a bright future after the storms have passed as the threat against Israel will end and there will be real peace when allah's armies and allah are no more.
Only then will Arab and Jew live in true peace.
No allah,no problem
In that day all the nations will have learned what Egypts Pharoah learned ,you can't fight Israel and win.
Throughout history, Islam has both survived and spread through war (read the destruction and plunder of Israel) with the end objective of looting and booty. The excuse (and end result) has always been to "spread Islam", but that was just the excuse for war with the objective of plunder. This is the documented and practiced habit of Islam itself as well documented in the Qur'an (especially sura 8), The Sunnah (the "Way" of the Prophet Muhammad) and the Hadiths (reports of the actions of Muhammad).
A typical spokesman for Islam can be found on YouTube by searching that site for "
al-Huwayni gives solution to Muslims financial problems"
It is also instructional to Google the following: islam booty
Even sites such as Wikipedia.org give an interesting history regarding Islamic slavery.
On the site JihadWatch.org, read the paper linked in the upper left corner titled Islam 101.
Get a copy of the book "The Legacy of Islamic Antisemitism" from the author Andrew Bostom at the site andrewbostom.org. At the site, read the notes on the front cover painting.
AS A MATTER OF RAW SURVIVAL, in lieu of outside financial assistance or money from oil or natural gas revenues, Islam will make war and plunder in order to survive. Islam will today find some provocation to attack.
The nature of the plunder will not only be material goods and currency but also women and children (historically within Islamic countries by a ratio of two thirds as sex slaves)left over after most of the men have been killed off, along with some men and women retained for labor in order to maintain their Islam masters material needs.
Between the delights and necessity of plunder required by the Islamic world, and the desire to destroy Israel and her people, the motivation is absolute.
A good gateway site to these issues and the habits and doctrines of Islam itself to the modern day can be found at the site media-quest.com
Don't hunker down, rather get in gear and prepare. Like Congressman Allen West says, If someone says they are going to kick your ass, you don't wait for them to raise their foot.
Now, all this discussion of Islam itself may seem out of place, but in fact it is what we are dealing with and it is what to expect.
For the general good and survival of the country, become pro-active and get the word out to your fellow citizens. Tell your fellow citizens about the alternative news sources to the mainstream media where one can learn about what we are facing and not just from the nature of Islamic society itself.
Again, a good gateway site is media-quest.com
GET THE WORD OUT to your fellow citizens.
A shopping cart vender with eight kids sets himself on fire on the steps of the city hall as a protest? It's hard to be sympathetic and it's not hard to see why the Muslim countries suffer economic hardships in the face of this kind of pathological child bearing rates. Israel sees similar child bearing rates, but it's not nearly as universal and Israeli society is more rationally grounded. Still there are consequences, witness the massacre of the Vogel family. It is hard for one set of parents to protect a family so large.
But since when does Europe have a history of confronting economic hardship with xenophobia? Is this to be confused with Islamaphobia? The economic collapse of Germany after WWI helped to weaken it to the Nazis, but the Nazis were not xenophobic, they were antisemitic and antisemitism is not xenophobia. This comment really deserved some qualfication.
Great article Caroline !
Germany has opted for closure of its nuclear reactors under the pressure of das Grüne Totalitarismus (this younger generation wants to proof the world something good for what their parents did in WOII to the jews) in exchange for RWE (Rheinisch-Westfälisches Elektrizitätswerk) to make a deal with Gazprom (Russia)
Russia is delivering Iran’s nuclear capability so Russia is preventing any support to bomb Iran's atom bomb program.
The USA is financially strangled by the Chinese triad were they provoke a stagnation of the world's economy by a high energy price by a artificial high demand for (islam) oil.
China thus prevents the US to bomb Iran's nuclear underground facility as well.
The western world must opt for a massive nuclear power & a worldwide Electric Automobile Industry because of this geo-political stalemate due to this Chinese artificial Peak Oil !
Frank Gaffney's plea for Energy Freedom lacks the vision of both massive as well as much cheaper energy
Israel is now on the brink to defend the western values as well as the US & Europe for they cannot defend themselves anymore !
If Israel were to bomb Iran's evil works then Israel saves my freedom ..
If Egypt were to attack Israel then Israel is left no other option than to permanently occupy Sinai. The same with liberating the Christians in Libanon from Hezbollah ..
As far as Syria is concerned indeed it would be best that the Syrian Kurds were acknowledged in their right of self determination !
I thank miss Glick to examine the financial status within the Arab Uprise of countries like Jordan & Syria.
Most unfortunately Israel is one of two fronts.
The second is the rise of the Pakistani Neo Taliban and its jihadis infiltrating the atom bomb complex and secondly the construction of more atomic bombs thus provoking an arms race in that region.
So, here we have the two levers:
1. Russia over Germany and
2. China over the US to stay neutral in the islamic attack on the western world by attacking Israel .. and secondly the Pakistan front.
What the kenyan did on the 4th of June in 2009 in Cairo did Michelle LaVaughn Robinson in Suid Afrika were already 69.000 White Afrikaners have been murdered by blacks.
This is all not a fun game anymore.
It is about the future of free mankind
Not only islam must be out rooted form the face of the Earth but US liberalism as well !
Afrikaner: You are essentially 100% correct. Although the electric car and nuclear plants are unquestionably the practical short term solution, the electric car itself is not conducive to long term sustainablity. The electric car type transportation should utilized as an interim solution while this industrial age and land use [non]planning based on unlimited petrofuel transportation is reined in and transitioned to a high-tech and militarily powerful society rooted in sustainable agriculture and food production. That is, our land use and construction of cities at present is likely completely wrong. Included should be a focus on telecommunications and work from home. On the nuclear topic, solar photovoltaic and solar thermal (in use by 80% now in Israel for hot water) should come into primary use while retaining existing nuclear and power grid systems. The fuel being saved should be diverted to military use. Military manufacturing and support should be a primary focus until Islam is either contained or more ideally essentially eradicated. In working terms, your use of "rooted from the face of the Earth" may turn out to be apropros.
I remember you speaking a couple months ago, a question was raised regarding the Middle East. Isn't the elephant in the room Islam, you responded you did not know much about Islam. Well you should start learning about it.
http://www.andrewbostom.org/blog/2011/07/15/mere-73-of-palestinians-want-jews-annihilated-as-per-islam’s-canonical-hadith/
The storm that is approaching will be concentrated on the North African and Arab states which, now relieved of their autocracies, will be deemed sufficiently safe as an environment within which the antagonists will be contained, as if in a crucible, so that they are obliged to determine their own brand of democracy, since they will not be permitted to flee to Europe or the US. And to limit the degree of the likely atrocities, the Muslim Brotherhood, et al, will be under the threat of the ICC and a severe restriction on any economic aid, which cannot, by any realistic measure, be countered by funding out of Iran, Saudi Arabia, or even China whose own economy must be more inclined towards developing domestic consumption.
Israel will have problems if the defense policy is to fight foreign aggression in the way that the foreign aggressors expect Israel to conduct a counter offensive.
"Obama's Muslim Brotherhood friendly foreign policy"
You are insane.
I think Gantz is wrong for going slow for another reason. The Egyptian Army has been upgraded with advanced American weaponry, including over 1,100 M1A1 tanks. It will be in the interest of any anti-Israel group that takes control in Egypt to start a war with Israel as soon as possible, while they still have fresh spare parts handy. If they wait, Congress will likely cut off spare parts access and their stocks will slowly dwindle into nothing. Eventually their armed forces will be incapable of mounting offensive operations as fewer and fewer of their units will be at full strength due to breakdowns. Countries like China and Russia might help a little but not as much as Egypt would need. That's why I think that if any group that take control in Egypt wants to destroy Israel, they will need to start the war within a couple of months of taking power.
it really does not matter what anyone thinks!!!!!!!! " THE CREATOR OF IT ALL'' has it under control and "all prophesy will come true 100%, this cesspool that "all human's have created is about to be flushed" , humbling isn"t it!!!!!!!!!!!!!!!!