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What’s going on in Egypt?: The little and big pictures

nersesianroy121509_optBY ROY NERSESIAN
ANALYSIS

The Little Picture

The Egyptians have overthrown the 30-year autocratic reign of Mubarak for police brutality, a never-ending state of emergency, no free elections, no free speech, government corruption, willful negligence over the plight of the people, high unemployment rates, low wages for the employed, high food price inflation, and most important, no hope of change for the future. The new "caretaker" government is the military with the defense minister as nominal head of state. While this may look like change, it really isn't as the military has been running Egypt since 1956 when Nasser established his rule. However it's possible that the military, rarely a supporter of democratic traditions, will permit open elections. No matter who or what rules Egypt, certain economic facts will not go away. The longevity of whoever or whatever replaces Mubarak depends on how these are handled.

Egypt is a nation of young people. The median splits the shaded age profile into two equal areas, which, as seen below, is somewhere between 25 and 30 years.

egypt1022011_opt

There are virtually no employment opportunities for the young — hence the venting of frustration in Tahrir Square. Interestingly, Egypt has allowed Chinese imports to close its factories exacerbating the unemployment problem. One course of action that could be taken is to ban Chinese imports to force the factory owners to stop importing, which is far easier than running factories, and reopen the factories to restore the domestic economy.

Why can't low waged Egyptian workers be able to compete with the Chinese? I recently purchased a "Made in U.S." food blender whose price was about the same as the imports. The mantra that U.S. workers can't compete just isn't true. The Chrysler slogan "Imported from Detroit" hits the nail on the head. If it's possible for U.S. workers to compete with the Chinese, certainly Egyptian workers can.

The other problem is population growth, which has averaged 2.2% over the last 40 years. While this does not sound particularly high, the Egyptian population is marching merrily along pushing the outskirts of Cairo to the very edge of the Pyramids.

egypt2022011_opt

2.2% sounds modest, but at this rate, the population doubles about every 33 years; or, around 2045 there will be 160 million Egyptians. Agricultural land is finite. The Egyptians have been able to increase their agricultural output thanks to the Aswan Dam, although output is suffering in the Nile Delta with the cessation of the annual floods. Increases in food production have been brought about by more land under cultivation and greater reliance on fertilizers. But Egyptian agriculture cannot keep up with the growing population. Egyptian imports of foodstuffs were limited after the Aswan Dam was built. Today, 44% of wheat and corn, stables in the Egyptian diet, must be imported.

egypt3022011_opt

Egypt does export about 1 million tons of rice annually plus cotton, another agricultural crop. However, as the Egyptian population grows, food imports will have to increase. A portion of these imports falls under the U.S. Foreign Aid program; that is, paid for by U.S. taxpayers.

Egypt earns foreign exchange by tourism, Suez Canal and Sumed pipeline tolls, export of natural gas to Israel, and oil exports. As the following chart shows, revenue from oil exports is history.

egypt4022011_opt

The trend lines indicate that Egypt will be importing oil, placing a further drain on the nation's balance of payments, which has switched in recent years from positive to negative.

egypt5022011_opt

What Does This All Mean?

It means that the United States will be on the hook to keep Egypt in the western camp. We cannot afford to have Egypt fail no more than we could afford to have Mubarak fail. Only this time it is going to be far more expensive because of rising expectations of the Egyptian people. Of course, it would be in the interests of Saudi Arabia to also contribute to avoid an extremist government in Egypt, but if history is a guide, they won't give one red cent. Egypt will turn out to be another large welfare burden placed on the backs of U.S. taxpayers.

The Big Picture

One does not have to be a Middle East expert to realize that other Arab governments are worried and have every right to be worried. They are, as a group, uncaring autocratic regimes that treat their people badly, stifle expression, plunder what little the people have offering next-to-nothing in return. Everyone is guessing who'll blow up next with a list of candidates that encompass just about every nation in the region including Saudi Arabia.

My eyes are on Iran. The collapse of that regime will compensate for whatever losses may be suffered from the fall of other regimes that we have unsuccessfully propped up. Ahwishihadabrain rejoices in the uprising in Arab nations as a blow against the United States and Israel. A few days ago, Iranians held a nation-wide demonstration to mark the 32th anniversary of the Islamic Revolution victory with massive crowds, waving flags and chanting "Death to Mubarak!" and "Death to America!" These staged demonstrations may turn into un-staged riots. Iranians have taken to the streets before to voice their dissatisfaction with a government intent on turning loose the demons of destruction to force the appearance of the 12th Iman. What are the mullahs going to do if millions of demonstrators are marching in the streets of Teheran? Order the police and military to shoot them all? It'll be far easier for the police and military to shoot all the mullahs.

Roy Nersesian, a resident of Maplewood, teaches at the Leon Hess School of Business at Monmouth University in West Long Branch and also at the Center for Energy and Marine Transportation at Columbia University. He has authored several books, the last on Energy for the 21st Century published by M.E. Sharpe.

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