In the summer of 2008, the so-called “food price crisis” took Egypt by storm. Drastically rising food prices made headlines and left a population devastated by the burden of increased food costs. While the Egyptian media has now stopped covering the issue, the main dynamics that caused the “crisis” in 2008 persist until today.
While the government claimed at the time that food price hikes were caused by fluctuations in “international markets”, the story appears to be more complex with government agricultural policies playing a central role in food price inflation.
On 10 May, the government statistics agency CAPMAS reported that the national inflation rate in April had reached 11 percent, a 0.9 percent increase from 2009. The agency cited the soaring prices of foodstuffs in particular, with vegetable prices rising by 45 percent. Experts now project that Egypt’s national inflation rate will reach 13 percent by the end of 2010, many of them attributing this increase to “rising global prices” and excessive quantities of “raw material and commodities” on the global market.
For others however food price inflation and the crisis of 2008 represent a much deeper problem: the introduction of neoliberal policies which have transformed the Egyptian economy over the past two decades.
“Neoliberalism’s basic idea is that society is like a pyramid: When you raise the tip the foundation rises with it,” says Habib Ayeb, a geographer at the American University in Cairo’s Social Research Center and expert on the social effects of state agricultural policies on Egyptian farmers. Following this logic, increased private investments in Egypt’s agricultural sector should have bolstered employment opportunities. But Ayeb explains that the situation in Egypt since the 1980s has proven the opposite to be true, whereby the tip is rising and becoming disconnected from the rest.
The Egyptian government, in close collaboration with USAID officials, began introducing a broad program of agricultural liberalization in the 1980s that aimed to limit state intervention–in the form of subsidies and controls on cropping patterns–and encourage a competitive market system based on private enterprise and export-led growth. These policies continued into the 1990s after Egypt concluded a structural adjustment agreement with the International Monetary Fund. A key component of these agrarian reforms was a new land law, known as Law 96, that revoked tenure rights for small peasants which had been in place for 40 years and allowed large landowners to charge market-based rents.
For government critics, Egypt’s food inflation must be seen against the backdrop of these broader economic policies.
In the village of el-Ghannama near Mansoura, Haj Desouki talks about food prices. His story begins with changes that occurred in a seemingly by-gone era.
“Before the High Dam was built there was a natural process that brought a new layer of soil to the land every year,” a reference to the annual Nile flood that brought rich silt deposits to the riverbanks producing an natural soil enrichment cycle. “Since the construction of the dam, this process has been obstructed and the soil has become poor.”
As the soil became increasingly less fertile, farmers became dependent on chemical fertilizers to increase their crop yields.
“Today it is impossible for farmers not to use fertilizers and herbicides,” says Ali Kholeify, an herbicide and fertilizer salesman in Haj Desouki’s village. “Every season has certain herbicides, every vegetable requires a certain chemical.”
Ayeb explains that in the 1950s and 1960s Egyptian agricultural policies sought to protect small farmers and provide them with a respectable income. “In the pseudo-socialist period there was the idea of living on the land and surviving from it… there was a guarantee of national agricultural security.”
Thus, as fertilizers and herbicides flooded the Egyptian market, the government provided subsidies to support small farmers and make food available locally.
Since the late 1970s, government subsidies have gradually receded and chemical fertilizers have instead been sold on the open market. Moreover, today Egypt is one of the biggest importers of fertilizers in the world and this dependency has in turn affected local prices.
“The state used to provide everything, from fertilizers to herbicides. Today, things have changed 180 degrees,” Haj Desouki reflects.
In 2009 the government started subsidizing certain food exports, such as nuts, further tying local production to foreign markets. Meanwhile, authorities have significantly reduced tariffs on imported goods, like seeds, to benefit large importers. These policy changes have had drastic effects on the ground as the state has used its resources to protect large agricultural investors rather than products that all farmers can use.
“Local prices increase because of rising costs of inputs, including seeds and chemicals,” says Haj Desouki. “While agro-businesses sell the best products in foreign markets,” the farmer continues, “we are at the mercy of prices on the local market. I want to know from the president why he is subsidizing agro-business and not small farmers.”
These policies of eroding state protections and exposing Egypt to global price swings brought about the infamous food price crisis of 2008. Though the government has a special fund to cover such price fluctuations, it was insufficient to offset the sudden increases.
Reflecting on the forces that brought about the price crisis, Ayeb explains that there is no guarantee such a problem won’t happen again.
“When will the political decision-makers and civil society decide that the price bomb can go off at any time?” Ayeb asks. “The country can’t survive under the current political situation.”
