Did Wall Street Have a Hand in Egypt’s Unrest?

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It appears that in discussing the street protests in Egypt against Hosni Mubarak’s oppressive autocratic rule, little coverage in our media has been given to the role that speculation in the stock exchange markeplace might have had in Egypt’s current civil unrest.  Ed Schultz has been one of the few media voices that has touched on this subject, as he did an excellent piece on his show (video above) regarding how pricing speculation in basic food staples was a contributing factor to Egypt’s unrest. He details how the U.N. estimated that by 2008, speculators held 65% of corn future contracts, 68% of soybean, and 80% of wheat.  Egypt happens to import more wheat than any other, where its price rose more than 70% last year.  With the price of a basic staple of their subsistence skyrocketing, no wonder the Egyptian people are mad as hell and have taken to the streets to get rid of Mubarak.

So how is this all connected to economic refugeeism?  Because it all ties into a basic phenomenon: how a transnational culture of gambling with corporate greed has been having a destructive impact on people’s livelihoods across the world.  Wild speculation in the real estate industry contributed to bringing the U.S. to the brink of another Great Depression just two years ago.  Wild speculation was also what led to price gouging at the pump during the Bush Administration, as we all saw oil prices soar through the roof.  The reach of the proverbial invisible hand of corporate greed driving wild speculation in world markets doesn’t end there.  More concretely, food supply has seen the disturbing influence of corporate gambling leading to the displacement of farmers and the spread of hunger around the world.  For example, in Mexico, NAFTA has had a disastrous effect on a basic staple of that country: corn.  As Peter Canby of The Nation highlighted back in 2010:

Maize—”corn” in the vernacular—is, in the amount produced, the largest grain crop in the world. In most places it is grown as animal feed; but in Mexico, for reasons unique to the country’s culinary history, it provides some 70 percent of the caloric intake of rural families.

[...]

Inside Mexico, NAFTA was the project of a group widely referred to as “technocrats” in the government of Carlos Salinas de Gortari who belonged to the modernizing wing of Mexico’s ruling party, the Partido Revolucionario Institucional (PRI). When Salinas came into office in 1988, the government—as a legacy of Mexico’s revolution—was highly protectionist, strong on social services and involved in one way or another with just about every aspect of the economy. By the standards of modern free-market economies, Mexico was inefficient and often corrupt, and people were relatively poor, but the government’s social and economic benefits were widespread.

Salinas and his technocrats decided to slash the safety net and throw open Mexico to free trade. Salinas argued that Mexico’s low wages and physical proximity to the United States gave it a natural advantage as an exporter, and he promised to close the wage gap between the two countries by developing an export economy. He thereby aimed to solve the historic problem of immigration to the United States. Mexico, Salinas promised, would “export goods, not people.”

For many Mexicans and non-Mexicans at the time, the prospect of change was welcome. According to Laura Carlsen, director of the Mexico City–based Americas Program of the Center for International Policy, “There was a feeling of euphoria. People were convinced [NAFTA] was going to create jobs, create industrial corridors, reduce emigration and get people out of rural areas where they didn’t have services. At that point, no one was talking about the ties of indigenous people to the land.”

The euphoria would come crashing down when faced with reality though:

[...] Soon after NAFTA was signed, tariffs on corn from the United States were eliminated and US corn began flooding Mexico. Corn was further subsidized for export by the US government and arrived in Mexico at 20 percent below its already subsidized cost of production. Much of the corn from the United States was intended as animal feed, but it depressed the price of corn generally and by 2008 the real price paid to Mexican corn farmers had dropped 50 percent.

[...]

In an essay in Sin Maíz, no Hay País, a book on Mexico’s corn crisis published in 2003, David Barkin, a professor at the Autonomous Metropolitan University of Mexico, quotes a Salinas-era technocrat who says that it was the administration’s policy to remove half of the population from Mexico’s rural areas within five years. It’s unclear what the government ever had in mind for the displaced farmers. At the time, a political scientist who closely monitored Mexican politics told me, “They have no credible prediction as to where these people will be employed. My guess is that they’re thinking Los Angeles.

In general terms, the Salinas administration assumed NAFTA export industries would generate jobs for displaced farmers. It was soon proved wrong. According to NAFTA’s Promise and Reality, a well-regarded 2004 report from the Carnegie Endowment for International Peace, in the first decade of NAFTA a million workers a year entered the Mexican labor force, while the economy created only half a million jobs annually. Perhaps not coincidentally, the tide of immigration to the United States swelled during these years to about the same number—half a million a year.

Is it any wonder that wild speculation and blind faith in a de-regulated market exchange both in the Mexican and the U.S. corporate elites led to an astronomical wave of new economic refugees migrating to the United States to escape the oppressive conditions created by bad neo liberal economic policies back home?  Actions have consequences, and the social instability we’re witnessing in Egypt (besides it being due to an autocratic ruler) is partly a consequence of market speculation of food prices grown out of control.  In our borders, our blind faith on NAFTA and on the “invisible hand” of unregulated trading practices has had the consquence of a worsening of our “illegal immigration problem” … but as long as we don’t connect the dots in all this, we’ll be doomed to repeat the same mistakes of never really addressing anything seriously, whether across the world in the Middle East, or right here in our own American continent.