Rising prices and turmoil in the Middle East

Photo: Felix Tusa
Tunisia: Women's day protest August 2012

By Paul Roberts

Since this summer a renewed wave of mobilisations has emerged across the Middle East and North Africa. The unrest has included big and often violent protests against the US in Egypt, Tunisia, Libya and Turkey.

In addition to demonstrations against US-inspired Islamophobia, protests have been sparked off by a wide range of other issues – examples of which include the following.

· In Turkey in October there have been widespread anti-war protests against its government’s intervention in Syria.

· In Bahrain pro-democracy protests against the US-backed dictatorship are on the increase and in Jordan large demonstrations for political reforms have re-emerged.

· In Egypt a wave of strikes since the summer has seen workers, in the private and public sectors, fighting for better wages and working conditions.

· In Tunisia there have been pro and anti government protests plus strikes taking place, whilst thousands have demonstrated for women’s rights.

· In Libya protesters stormed the parliament in October whilst pro-government and anti-government militias have been clashing around the country.

· In Iran there have been protests in response to the recent sharp fall of the Iranian currency.

· In the West Bank Palestinians demonstrated in September against the Palestinian Authority’s Value Added Tax increase and in Gaza there have been protests against the closure of supply tunnels and the blockade imposed on the territory.

Whilst the range of economic and political demands is varied, the rise in discontent these mobilisations reflect relates to the deteriorating economic situation affecting the masses in the region.

The slow down of economic growth, in line with the overall slowing of the world economy since last year, has been accompanied by inflation. So living standards are falling again and increasing numbers of people are being pushed into poverty and hunger.

Slowing growth and inflation

Global economic growth is slowing both in the imperialist countries and in the semi-colonial countries. October’s International Monetary Fund (IMF) World Economic Outlook reports that growth across the advanced, emerging market and developing economies has decreased and it has revised down its forecasts.

World output that increased by 5.1 per cent in 2010, slowing to 3.8 per cent in 2011 is forecast even by the IMF at only 3.3 per cent this year.

Inflation is also now accelerating with world commodity prices, which previously peaked in April 2011, starting to rise from July this year. (see Graph 1).

Graph 1
Google Finance Dow Jones-UBS Commodity Spot Index


Food prices and semicolonial countries

The populations in the semicolonial countries are more sensitive to rises in the prices of food commodities than those in the imperialist countries. Average income is lower and food constitutes a greater proportion of household expenditure as is illustrated by the examples in Table 1.

Food in the Middle East and north Africa typically represents 20 to 40 per cent of household expenditure, compared to less than 10 per cent for the US and Britain.


Table 1

Source: US Department of Agriculture


Food prices, discontent and unrest

Food commodity prices are back on the rise. Last week the United Nations’ Food and Agriculture Organisation (FAO) reported that in September they had reached their highest level for six months. (See graph 2)


Graph 2
UN FAO Food Price Index October 2012


After 2007, when the economic slump hit the imperialist countries, in the semicolonial countries a slowing of growth was accompanied by a food crisis – prices rose to unprecedented levels with the FAO index peaking in 2008.

This food crisis prompted unrest across the world, with the U.S. State Department attributing more than 60 riots between 2007 and 2009 to the price of food.

Food prices then reached an even higher peak in December 2010 and unrest spread across the Middle East and north Africa – with a wave of mobilisations toppling the governments of Tunisia and Egypt.

2012 food price rises

Since this summer food prices have been on the rise again, driven up by a combination of a supply ‘crunch’ and the inflation-generating economic policies of the imperialist countries.

In particular the prices of major crops have risen strongly over recent months; wheat, corn and soybeans are up 20 – 40 per cent since last year, with the later two staples now at unprecedented levels – as can be seen in Graph 3.


Graph 3
IMF World Economic Outlook October 2012 Major Crop Prices


Climatic factors have contributed to a supply crunch. Significant droughts this summer in the US Midwest, South America and the Black Sea Region have resulted in the production of corn, soybeans and wheat all being hit.

Supply is also constrained because the US diverts a large portion of its crops from food to biofuel production – such as the 40 per cent of US corn that by law has to be used on ethanol production.

Food prices are also subject to the same economic pressures affecting all commodities at present. Extremely loose monetary policies, pursued by imperialist central banks, are resulting in vast volume of dollars, yen and sterling flooding global markets, stimulating inflating.

Most significantly the US in September commenced its third round of ‘Quantitative Easing’ (QE3) and intends to print $40 billion of additional currency every month for some time to come. Commodity markets’ anticipation of the launch of QE3 started to drive up prices from July, as can be seen in Graph 1.

Imperialism is aware of the political destabilisation associated with food price rises. As the IMF notes: ‘Rising food prices also have political economy dimensions: they contribute to widespread discontent, thus destabilizing fragile postconflict political systems.’

Countries that import a large proportion of the food they consume, so suck in food inflation as world prices rise, are considered particularly vulnerable by the IMF, which is warning of potential problems in the Caribbean, Central America, sub-Saharan Africa, the Middle East and north Africa.

In some countries food prices have risen even more due to local currency depreciation, such as in Tunisia where the dinar has fallen sharply against the US dollar this year.

Finally, Western aggression in the region is further exacerbating these problems. Imperialism’s economic sanctions on Iran and the military conflict it is sponsoring in Syria are hitting food supply and prices in both countries.

This summer’s turmoil across the Middle East seems set to continue.