Forecasting the Effects of Food Price Inflation in Egypt and Yemen

Sana'a suk market, beans seller

Image by Ai@ce

One of the most popular grievances associated with the Arab Spring in Egypt and Yemen was about increased food prices – a grievance that has caused upheaval in these countries before, and has significant potential to do so again. Admittedly, food price inflation may not be a sufficient condition for Arab Spring-esque revolutions to occur – but history suggests that high food prices are especially likely to catalyze unrest in Egypt and Yemen (and throughout the Arab world, really). Considering this history in conjunction with current food price trends, it appears that rising food prices may pose a threat to stability in Egypt, and will almost certainly send Yemen into another political tailspin. How does one reach conclusions like these? Here’s the full story.

Part One (if you will) concerns the ominous history across the Arab world, and in Egypt and Yemen in particular, of social unrest related to food price inflation. This history is effectively summarized in a recent study by the International Food Policy Research Institute (IFPRI), which shows that, since 1960, the incidence of intrastate conflict in the Arab world has been much more correlated with food insecurity and food price inflation than comparable incidences of intrastate conflict around the globe. In other words, food price inflation above a certain level is a near-foolproof predictor of domestic strife in countries like Egypt and Yemen. And the recent experiences of these two countries substantiate this idea.

Since the 1970s, Egypt has experienced three major bouts of food price-related unrest. First, there were the Egyptian Bread Riots of 1977. These riots were explicitly about food price inflation, necessitated martial law in some governorates, and were only quelled by new government subsidies returning food prices to their pre-riot levels. Dozens died and about 800 were injured during these riots. Second, there were the 2008 protests and strikes associated with food price inflation, which compelled the government to enact policies raising wages and food subsidies. Finally, there was the Egyptian revolution in 2011, which was sparked, in part, by resurgent food price inflation.

2008 also saw violent riots erupt in Yemen, in response to rising food prices. These riots prompted the government to deploy tanks and forcibly restore order, although few substantive policy changes resulted. Then, of course, there was the 2011 Yemeni revolution, which – like the Egyptian revolution – was partly inspired by burgeoning food prices and the increasing unaffordability of dietary staples.

In light of this history, it’s evident that food price inflation is a harbinger of conflict in Egypt and Yemen. Which brings us to Part Two: What levels of food price inflation are we talking about? And how should we go about measuring?

To answer these questions, it’s worth turning to a mathematical model developed by the New England Complex Systems Institute (NECSI), designed to predict social unrest in the Arab world based on food prices. As NPR recently documented, this model has shown its worth by accurately forecasting the aforementioned 2008 food riots, as well as the initial bouts of unrest associated with the Arab Spring. This model also logically dovetails with the aforementioned IFPRI study.

The most important tenet of the NECSI model is this: If the FAO Food Price Index is above 210, food riots are close at hand. The higher above 210 the index is, and the longer that levels above 210 persist, the more likely food riots are to occur, and the more severe they are likely to be. What the model does not tell us – which will be addressed below – is how to gauge the likelihood that such riots will translate into political instability or revolutions.

So, where does the FAO Food Price Index stand? From fall 2010 to summer 2012 the index was well above 210. It averaged 228 in 2011, peaking near the beginning of that year (which makes sense considering the timeline of the Arab Spring). The index dipped below 210 in May and June of this year, but rose to 213 in July and has remained above 210 ever since. In October it was still 213, and it seems to be on an upswing that will last several months.

Experts estimate that the FAO Food Price Index will slowly climb for several (perhaps many) months mainly because of worldwide droughts that led to dramatically lower food production this past summer, especially in the United States. These droughts and their effects on food prices are especially significant for Egypt and Yemen because these countries are highly reliant on food imports, and because food’s share of total household expenditure is already wallet busting (it’s almost 30% in Egypt; in Yemen it’s about 40%).
Exactly when high food prices will translate into instability is hard to say, but lingering unrest in Egypt and especially in Yemen, combined with unpromising food price projections, makes destabilizing events similar to those of the Arab Spring a distinct possibility in the near-term. Here, in closing, are the indicators that should be watched to assess the likelihood of political instability:

Watch the FAO Food Price Index. The longer prices persist at levels above 210, and the higher they climb, the more intense any food price-related unrest will become, and the more likely Arab Spring-esque events will be. More specifically, watch for increased incidence of malnutrition and stunting among children (which happen to be woefully widespread in Yemen right now), and any increases in the ratio of food imports to total exports, as studies show these two factors are especially robust predictors of social unrest in the Arab world. Also keep an eye on jumps in the FAO Food Price Index: A jump of 40+ points from one year to the next is a sign of imminent turmoil. Such jumps immediately preceded both the 2008 food riots and the Arab Spring.

Finally, be aware that the above is contingent upon median household incomes staying roughly the same, so watch those as well. If median household incomes rise, food’s share of household expenditure will fall and food prices will have less destabilizing potential. If incomes fall, however, the opposite will hold true and food price fluctuations will have greater subversive potential than ever. Note, the outlook on this front is somewhat positive for Egypt: IMF projections show Egypt’s GDP per capita growing substantially between now and 2017 – which will probably (but not necessarily) translate into higher median household income. The outlook in Yemen, on the other hand, is bleak: Yemen’s GDP per capita is projected to stagnate through 2017. In short, Egypt is a source of concern, but probably won’t destabilize the way it did in 1977 or 2011 as long as economic growth outstrips food price inflation. Yemen, meanwhile, is on the brink of a major food crisis, which will likely entail unrest akin to 2008’s, if not 2011’s.

One last thing: If this advice about what to watch for in Egypt and Yemen sounds generalizable to other countries in the region, that’s because it is. You can use the tools outlined in the last two paragraphs (basically FAO Index projections plus GDP per capita projections) to prognosticate about the effects of food price inflation in any country in the Arab world.

Image courtesy of Ai@ce

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About Ryan Rappa

Ryan Rappa is a Global Academic Fellow at NYU Abu Dhabi, and recently completed a Master's Degree in Political Economy from NYU.

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