It's Mostly About Food

Commentary By Ron Beasley�

Unless you are Glenn Beck you probably see the demonstrations in Egypt as a revolt against tyranny.  I suggested here a few days ago that it might be more about unemployment and the skyrocketing price of food.  I'm not alone in thinking that.

The western media may be obsessing with social media but believe me this isn't the thing you are focusing on if you don't have enough to eat. Egypt, as the world's largest wheat importer, is reliant on countries like Russia and Pakistan for its food supply. American writer Danny Schechter puts it well: "Yes, the tens of thousands in the streets demanding the ouster of the cruel Mubarek regime are there now pressing for their right to make a political choice, but they are being driven by an economic disaster that has sent unemployment skyrocketing and food prices climbing."

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Nouriel Roubini - who was among the first to predict the financial crisis and was dubbed a Cassandra for his troubles in 2005 - urges us not just to look at the crowds in Cairo, but what is motivating them now, after years of silence and repression? 

He agrees that the dramatic rise in energy and food prices has become a major global threat and a leading factor that has gone largely unreported in the coverage of events in Egypt. 

If we take Roubini's advice and look at underlying motives or para-economics we can see deeper issues. Is it too speculative to see the 25 January revolt as the first food revolution as fuelled by peak oil? Oil prices affect food prices when you have a petro-chemical food economy.  

Egypt's not unique in all this. World food prices hit a new record high in January after rising for a seventh consecutive month, the UN's Food and Agriculture Organisation (FAO) said today (Feb 3 2011), warning the poor would be hit hardest.

While most are concerned with what Middle East country will fall Seeking Alpha thinks we should be looking a bit closer to home.

Mexico seems likely follow Egypt into collapse within two years based on falling oil revenue and rising food prices:

• Mexicans spend about 22% of their disposable income on food. In 2010 corn prices increased 52% and wheat 47%. With the floods in Australia, ethanol in the U.S. and higher fuel prices it seems likely food will consume 50% of disposable income within a year. That is an average. There will be a critical percent of the population where food costs will exceed their disposable income. Hunger will amplify risks.


• Mexico's government gets about 40% of its revenues from oil. As noted in BP data complied at Energy Export Database Mexico's domestic consumption (black line) will force its oil revenues (green area) to drop to zero within a few years. Egypt's oil revenues dropped to about zero in 2010.

So we can see similarities between Mexico and Egypt. The problem is Mexico is a lot closer.

Without the ability to feed its people or fund its security forces, it seems unlikely Mexico will remain a viable government. Drug wars illustrate the strength growing in local war lords. The U.S. Joint Forces Command's JOE-2009 noted Mexico as at risk. U.S. border states will likely destabilize. Without cheap oil, the U.S. military is completely unprepared to defend these states from mass migrations.

Of course another reason the military will not be able to respond is that a large portion of it is thousands of miles away.