The Egyptian Uprising Is a Direct Response to Ruthless Global Capitalism
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But, as we learned in the U.S., what goes up with artificial helium plummets under real gravity. Starting in the second half of 2009, oil prices fell and foreign banks slashed their capital holdings in Arabic nations. The hot money was cooling off. Even in the oil-rich UAE, the speed of capital outflow set foreign capital levels back to where they were in 2004, demonstrating how temporal, deceptive, fickle and irresponsible international speculative capital is. When hot money gets cold, it moves on, leaving vast economic devastation in its wake.
Not surprisingly, those foreign speculation strategies didn’t bring less poverty or more jobs either. Indeed, the insatiable hunt for great deals, whether by banks, hedge funds, or private equity funds, as it inevitably does, had the opposite effect.
Whenever hot money hones in on a geographical location or financial product, it creates the appearance of economic enhancement (such as with our GDP growth based on financial services, for instance). But, on its way out the door, that mirage is replaced with harsh decline.
In March 2010, in an effort to keep foreign capital coming in, Egypt’s Ministry of Investment presented the country's virtues to investors in a glossy “Invest in Egypt” brochure. The document proudly cited Egypt as being one of the world’s top 10 “Reformers,” as reported by the World Bank and International Finance Corporation’s (IFC). The World Bank’s definition of "reformer" has nothing to do with conditions for citizens, and everything to do with the degree and speed to which “hot” international money can zoom in and out of a country. Egypt had made the top 10 “Reformers” list for four out of the past five years (a distinction shared with Colombia, where urban unemployment has risen to over 13 percent).
Ironically, the Ministry’s brochure touted the large college graduate population entering the job market each year -- 325,000. The same graduates are the core of the current revolution. They failed to find adequate jobs and are faced with an official unemployment rate of just below 10 percent (though, similar to the U.S., that figure doesn’t account for underemployment, poor job quality or long-term prospects). Meanwhile, 20 percent of Egypt lives in poverty (compared to 14 percent and growing in the U.S.) and 10 percent of the population controls 28 percent of household income (compared to 30 percent in the U.S.).
When a country relinquishes its financial system and population's economic well-being to everyone else’s pursuit of "good deals," the fallout will be substantial. Sub-prime lending may not have been one of Egypt's problems as it was in the United States, but soured foreign real estate investment was. Also, foreign banks persuaded Egypt to issue complex securities with crazy derivatives in them (shades of Greece). Those securities plummeted in value as foreign speculators shunned them. Today, credit default swap spreads on Egyptian debt (and that of other Arabic countries) have substantially dropped in value, as international speculators are betting on further upheaval, targeting Egypt like just another number on a dartboard.
Citizens protesting in the streets from Greece to England, and more demonstrably, from Tunisia to Egypt, may be revolting for national reasons and against individual governments, but they share a common bond. They are revolting against a world that lines the pockets of rich deal-makers while sticking the tab to ordinary people. That bond is global. Related protests could reach Colombia and Ghana -- and maybe someday, the United States.
For in the United States, economic statistics are no better. By certain measures, like income inequality, they are worse than in Egypt. But we have no evil dictator to be a common focus for, say, an American economic revolution. Here, we freely elect the politicians who campaign with corporate funds and deregulate our financial system, who bail out entire banks instead of individual mortgage holders, and who keep corporate tax receipts low while increasing audits on small businesses and struggling individuals. Here, we elect the leaders who govern our growing income inequality, and wonder how Wall Street can pay itself another round of record bonuses.