Neoliberal economics will produce more "Egypts"

If economic conditions have become so dire that the normally "apathetic" (terrorized into silence) Egyptian public has become very courageous to the point of revolution, it is certain these same economic conditions in other countries will spread this revolutionary fervor.

Yet Another Reason to Drop the Dollar

International Speculation and Rising Food Prices

By UMBERTO MAZZEI   February 14, 2011

Henry Kissinger once said that whoever controls food controls people. In other words, everyone surrenders when they see their children starve. That is how the U.S. government subdued the American Indians defending their lands, by exterminating the bison that provided them food and instead handing out food on reservations. The British government did the same to subdue the Boer republics in South Africa by forcing the Boer civilian population into the first concentration camps ever and letting them starve.

International cartels now use their control over the global food supply to make huge profits. There are six major corporations that control the purchase and sale of agricultural products: Cargill, Kraft, Bunge & Born, ADM (Archer Daniels Midland), Nestlé and General Mills. Food prices are set at exchanges in Chicago, New York and London.

Some countries shield their population from commodity speculation on basic foods by restricting the export of their agricultural staples until domestic demand is satisfied. This has a clear and legitimate purpose: to stabilize domestic prices and ensure supply for their own people. Domestic prices are also an uncomfortable testimony of real prices and temper full international market control over pricing.

On January 22, agriculture ministers from 50 countries met in Berlin, to examine the rise of international prices of commodities during the second half of 2010. Before the assembly, World Trade Organization (WTO) director, Pascal Lamy, earned merits with the global food cartels by attacking export restrictions. No doubt hoping that the cartels will hire him when he loses his present position, Lamy attributed the record high international prices of agricultural products to the export limits that some countries apply. His claim was a classic case of sophistry—a distortion of the truth with a false arguments.

"Export restrictions are a prime cause of current and recent surges in global food prices, and countries should find other ways to secure domestic supplies," the WTO chief said. "Export restrictions lead to panic in markets when different actors see prices rising at stellar speed," he added.

Mr. Lamy illogically ignores the fact that a sudden rise in agricultural commodity prices, as reported three weeks ago by the UN Food and Agriculture Organization (FAO), cannot be attributed to controls that have always been there. Those controls, as he acknowledges, are imposed to assure supply to the population of the producing countries and, although Lamy did not say it, also to stabilize national and to an extent, international agricultural prices. This last point is very annoying to the cartels that dominate international food trade.

After attacking export restrictions, Mr. Lamy stated that exporting countries seek other ways to assure their own national supply. But here his proposals for a different approach are misleading. Lamy called for an increase in global food production, "more social safety nets, more food aid and food supplies and …humanitarian aid exempt from export restrictions."

Let's look first at the call for an increase in global food production. Countries that now must import food used to feed themselves until free trade and the export subsidies of rich countries ruined their farmers. The WTO unfairly allows subsidies in some countries and prohibits them in others. More production in countries that subsidize exports would worsen the rural crisis in the Third World. more

Matt Stoller: The Egyptian Labor Uprising Against Rubinites

By Matt Stoller, the former Senior Policy Advisor for Rep. Alan Grayson. His Twitter feed is @matthewstoller

Via Wikileaks, we learned that the son of the former President of Egypt, Gamal Mubarak, had an interesting conversation in 2009 with Senator Joe Lieberman on the banking crisis. Gamal is a key figure in the forces buffeting Egypt, global forces of labor arbitrage, torture, and financial corruption. Gamal believed that the bailouts of the banks weren’t big enough – “you need to inject even more money into the system than you have”. Gamal, a former investment banker trained at Bank of America, helped craft Egypt’s industrial policy earlier in the decade.

Our purpose is to improve Egyptians’ living standards. We have a three-pronged plan to achieve this: favoring Egypt’s insertion into the global economy, reducing the state’s role in the economy, and giving the private sector greater freedom.

Deregulation, globalization, and privatization. This should be a familiar American recipe, commonly associated with former Treasury Secretary and Goldman Sachs chief Bob Rubin. That Rubinite rhetoric has been adopted by the children of strongmen shows the influence of Davos, the global annual conference of power brokers. Gamal, far more polished than his father, understood that the profit and power for his family lay in cooperating with foreign investors to squeeze labor as hard as possible.

This strategy was targeted at the global labor arbitrage going on since the 1970s, with Egypt’s role as one cheap labor in-sourcer. It’s no surprise that the Mubarak family has $40-70B stashed away in the global tax safe havens coddling the superrich. This wealth was extracted from the youth and women in Egypt’s new factories making low-cost goods for export. This is why the revolution was spearheaded by youth and women, and why the nationalist business elite, with its deep ties to the military, sided with the protesters. Mubarak’s inner circle aligned themselves with international investors and set themselves against domestic business and military interests.

In other words, this is a revolt against Rubinite economic policy. Even the rhetoric Gamal used in pushing his policies echoes that of Rubinites. This Orwellian model of discourse frames corrupt decision-making to confiscate wealth from ordinary people as “tough-minded” because it’s “unpopular.” Here’s Gamal:

Bringing change is always a harsh task. You must sometimes accept unpopularity. But if you are really convinced that you are making the right decision, you must stick to it. Modernization is worth this price. If not, we will have to be honest both with ourselves and public opinion and acknowledge that we failed. I am perfectly aware of what the consequences of such a failure could be, and I am doing my best. I know that our action will later be examined scrupulously. This is what we call a “result-oriented culture.” more

Fighting back against such forces is a difficult task.  And known solutions to some of these problems have been legislated out of existence.  Mostly, however, fighting back is difficult because it counters the neoliberal zeitgeist.  Here is an excellent discussion of why countries need capital controls--one of the good ideas to have emerged from Bretton Woods.