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    Middle East
     Feb 13, '13


SPENGLER
Egypt, Syria - it's just the end of them
By Spengler

The unthinkable is happening in the Arab world, and it's not as awful as advertised, unless you have the misfortune to live there. Two years and 60,000 casualties into Syria's civil war, the foreign ministries of the West have nothing to show for their peacemaking efforts except a wad of airline and hotel receipts.

Egypt is proceeding with grim inevitability towards financial exhaustion, and the government has just announced a three-

 
pita-per-day bread ration. Libya has disintegrated, and Tunisia, the poster-child for moderate Islamism, looks ugly after the murder earlier this month of opposition leader Chokri Belaid. Yet the global consequences are negligible.

Excluding the Gulf States, the combined gross domestic product of the major Arab countries is a bit over US$600 billion, about the same as Switzerland's.

 

The disintegration of the Arab world is a great human tragedy but a minor economic nuisance.

Two years after I warned that the so-called Arab Spring arose from economic failure and portended future disasters, a warning I reiterated in 15 subsequent essays for this publication, it has come to the attention of the foreign policy community that Egypt's economy is in a tailspin.

At the Council on Foreign relations blog, Elliot Abrams and Steven Cook recently warned about the country's economic freefall. Dr Cook accused me of "wanting Egypt to fail", blaming the messenger for the ill-tidings. That is a paltering misrepresentation; I do not want Egypt to fail (although I am gratified to see Steven Cook fail). Similar commentaries came from Felix Imonti at the National Interest February 7, and Marc Lynch at Foreign Policy on January 31.

Yet the tone of these dire warnings is more elegiac than exhortative. The foreign policy community appears numb, like the Titanic passengers listening to the band play Abide With Me in the ship's final moments. At the May 2011 Group of Eight summit meeting in Deauville in France, Western leaders spoke of a $20 billion aid package for Egypt and Tunisia, and then French president Nicholas Sarkozy told the press that the amount might double.

As Egypt's foreign exchange reserves run out and subsidized bread becomes scarce in the streets, though, the foreign policy punditeska is offering no emergency programs, no calls for international conferences. Instead of Sarkozy's $20 or $40 billion, the International Monetary Fund is dickering with Egypt's President Mohamed Morsi for a mere $4.8 billion - barely two months' financing requirements for Egypt - and demanding in return drastic cuts in the subsidies that keep body and soul together for the poorer half of the population.

Egypt's Islamist government has nothing to offer its people but hunger - not belt-tightening, but malnutrition. The country's Minister of Supply, Bassem Auda, told a press conference February 10 that the bread subsidy would be cut to three pita loaves per capita (perhaps 400 calories), the Egypt Daily News reported. Half of the $3 billion annual bread subsidy is wasted on the black market, Auda said. The trouble is that millions of Egyptians subsist on the half that isn't wasted. The newspaper interviewed some ordinary Egyptians after Auda's announcement:
"Three loaves per person is not enough," a middle-aged woman who preferred to remain anonymous said. "I can be content with three loaves; I have diabetes, yet my children each eat at least five loaves per day." Managing a family which consists of seven members, the woman said she pays 150 piastres [22 US cents] per day, the worth of 30 loaves of bread. "A co-worker in the hospital I work in eats around 10 loaves per day," the woman said.

"Three loaves of bread would've been enough back in the day when the loaf was large and well-baked," said Ahmed Al-Gazzar, a middle-aged street vendor. "Now what they sell us isn't bread; it's more like biscuits. I eat over six loaves per day and remain hungry." Al-Gazzar said that his two children eat around eight loaves of bread per day. "The stomach is never thankful," Al-Gazzar said, citing a popular expression. "If they determine bread rations, people will go mad! They want to share even our food? Are we animals so that they determine our food rations?"
Most alarming is the emergence of a black market in Egyptian pounds, with a street rate February 10 of 6.95 pounds to the US dollar, against an official rate of 6.72. Reuters reported February 10, "A run on Egypt's pound has left foreign currency in short supply and driven some dealers into the streets in search of people with US dollars to sell, spawning a new black market." Currency deflation (by nearly 15% since the beginning of this year) will translate quickly into higher prices for imported goods, including half of the country's food supply.

The punditeska has duly taken note of Egypt's unfolding economic disaster, but has proposed nothing. Morsi visited Germany in late January and came away empty-handed. Germany's government deplored the Egyptian president's characterization of Jews as "the descendants of apes and pigs". The Germans know just what that means and cannot ignore it. United States President Barack Obama has asked congress to renew Egypt's $1.8 billion in annual aid, but two-thirds of that is military assistance. After a 2010 video of Morsi's Jew-hating rant surfaced, the US Congress is less willing than ever to fund Egypt.

Even if the White House wanted more aid, it could not get it. With the fiscal crises that nearly took down the European Community last year and that remain the subject of bitter wrangling in the United States, no-one wants to hear about multi-billion-dollar donations to Egypt.

We have gone from "Shock and Awe" to "aw, shucks", in the bon mot of blogger Ruth King. What the foreign policy community considered unthinkable - state failure in Egypt and Syria - is proceeding unimpeded by any helpful suggestions, let alone action, from the world community. The only leader to offer aid to Egypt recently was Iranian President Mahmud Ahmadinejad, who visited Cairo on February 5 and promised a "big credit line" on condition that Sunni Egypt ally with Shi'ite Iran against the West. The man has a sense of humor. Ahmadinejad's visit, moreover, underscores the reluctance of the Sunni Gulf monarchies to aid a Muslim Brotherhood regime that they consider a danger to their own longevity.

There will be consequences, but they will be inconvenient rather than intractable. Greece and Italy might be flooded with economic refugees. Egypt might try to annex Libyan oil. Sophisticated Egyptian arms might find their way to Gaza. Syria's chemical arsenal might get into the wrong hands (although the United States, Israel and Russia seem able to collaborate on containing this particular threat).

What about Iran?
Sometime this year, I believe, either the United States or Israel will attack Iran's nuclear weapons program, and the ripple effects in the region will be minor. After Iran's Supreme Leader Ayatollah Ali Khameini rejected the American offer of direct talks on the country's nuclear ambitions, a successful Israeli strike (let alone a more devastating American attack) would humiliate the Tehran regime. Nothing fails in the Middle East like failure, and Iran's capacity to retaliate will be far weaker than feared.

There is nothing the Obama administration would like less than a military solution to the Iranian nuclear problem. After Khameini's confrontational statement, though, it is harder for the White House to stop the Israelis from acting (unless, of course, the US acts first). The White House and all its appointees, including incoming Secretary of State John Kerry, never have deviated from a policy of prevention as opposed to containment. The world community as represented by the International Atomic Energy Agency notes as a matter of record Iran's plans to speed up uranium enrichment.

Iran's ability to retaliate against a raid on its nuclear capacity, though, is limited. Hezbollah will fire some rockets at northern Israel but will refrain from an all-out assault because it knows that this time the Israelis would do their utmost to annihilate the Iranian-allied militia. Iran might close the Straits of Hormuz by mining the entrance, but that would draw the United States into the conflict. The Pentagon's contingency plans for neutralizing an Iranian nuclear threat go far beyond air strikes against Iranian enrichment facilities, and include the destruction of Revolutionary Guard bases and oil refineries.

Iranian cat's paws would commit a few terrorist atrocities, to be sure. But the Tehran government is well aware of Machiavelli's advice that if you set out to harm your enemy, make sure to harm him so severely that he cannot avenge himself. There is nothing Tehran can do to inflict serious harm on the West, but a great deal that the West can do to inflict catastrophic harm on Iran. In the worst case, other oil producers could replace most of its oil output in a short period of time. Were Iran to be shut out of the world market, the price of oil would jump to the detriment of the world economy, but Iran itself would starve.

Oil prices would jump if either Israel or the US attacked any Iranian target, but the long-term effect on energy prices is likely to be small.

Western governments should be drawing up plans for emergency humanitarian aid for Egypt and Syria, anticipating the flight of economic refugees to Europe. It seems odd for the United States to supply Egypt with updated F-16's, which only have trophy value for its military; Egypt cannot hope to win a war against Israel, and it doesn't (or shouldn't) have to fight its neighbors Libya and Sudan. Wheat would be a more appropriate American contribution. If the West cannot forestall state failure in Egypt, it should at least help to ameliorate the worst humanitarian consequences.

Whatever the West decides to do, however, the Arab world will decline in importance in world affairs. The foreign policy establishment's disappointment at the failure of the Arab Spring has made it possible to question the long-term viability of the Muslim world. Washington Post columnist David Ignatius, for example, reported on February 11 on the American Enterprise Institute's Nicholas Eberstadt work on Muslim fertility, a year after Eberstadt published a widely-noted paper. Ignatius wrote:
The Arab world may be experiencing a youth bulge now, fueling popular uprisings in Tunisia, Egypt and elsewhere. But as Eberstadt notes, what's ahead over the next generation will probably be declines in the number of working-age adults and rapidly aging populations. The Arab countries are now struggling with what Eberstadt calls their "youthquake." But the coming dilemma, he notes, is "how these societies will meet the needs of their graying populations on relatively low income levels."
Of course, the fertility collapse in the Muslim world has been there for a decade and available to any casual browser of the United Nations population database. Phillip Longman noted in his 2004 book The Empty Cradle that Muslim fertility was falling faster than any other part of the world population. In September 2005 I argued in this space that the Muslim world was heading towards a demographic catastrophe:
By 2050, elderly dependents will comprise nearly a third of the population of some Muslim nations, notably Iran - converging on America's dependency ratio at mid-century. But it is one thing to face such a problem with America's per capita gross domestic product (GDP) of $40,000, and quite another to face it with Iran's per capita GDP of $7,000 - especially given that Iran will stop exporting oil before the population crisis hits. The industrial nations face the prospective failure of their pension systems. But what will happen to countries that have no pension system, where traditional society assumes the care of the aged and infirm? In these cases it is traditional society that will break down, horribly and irretrievably so. (See Demographics and Iran's imperial design, Asia Times Online, September 13, 2005.)
The path to ruin in Muslim countries takes different forms: Semper idem, sed non eodem modo (always the same, but never in the same way), as Heinrich Schenker liked to say. The Muslim world is divided between backward and extensively illiterate countries like Egypt who cannot feed their children, and literate countries like Iran and Turkey where there are few children to feed. Cultures that do not wish to exist cannot be dissuaded from destroying themselves. The best thing one can do for doomed cultures is not to belong to them.

Spengler is channeled by David P Goldman. His book How Civilizations Die (and why Islam is Dying, Too) was published by Regnery Press in September 2011. A volume of his essays on culture, religion and economics, It's Not the End of the World - It's Just the End of You, also appeared last fall, from Van Praag Press.

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