Tag: economics

Egyptian farmers hit hard by COVID-19 remittances slump

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COVID-19 has pushed Egyptians migrant workers who would normally support their families by working in GCC countries or Europe back home and into the fields, slashing remittance income for poor farming families and cutting agricultural output.

Agriculture is considered the most resilient sector of Egypt’s economy but that has not stopped poor farming families from feeling the brunt of the global COVID-19 pandemic. In April, the International Food Policy Research Institute (IFPRI) warned that poor households—and especially those in rural areas— would likely suffer the most from lower remittances. 

Two months on, farmers such as Abdel-Qader Mustafa, from Qena in Upper Egypt, are feeling the reality of the global economic crisis caused by COVID-19.

Mustafa’s son used to work in Saudi Arabia, sending back roughly LE 2,000 ($124) to supplement his family’s income each month.  

“Due to the coronavirus, my son could not go back to his work in Saudi Arabia after the end of his annual vacation in February. Since then, he has been taking money from us,” Mustafa told Egypt Today.  

As a result, all seven members of Mustafa’s family have been pushed back into working the agricultural fields where they earn as little as LE 15 to LE 20 ($0.90 to $1.20) per day.  

Mustafa’s son is amongst the 20,000 Egyptian workers that have been either repatriated or deported from Gulf Cooperation Countries and European nations as a result of COVID-19 shutdowns and declining oil revenues.  

Egypt’s higher-income households who rely mostly on the services sector for their income have seen the largest COVID-19 losses in absolute terms, but the IFPRI says “the poor may find it harder to cope.”

The rural-urban differentiation 

“Rural households also lose, but less than their urban counterparts.” IFPRI says this is explained mostly by stronger economic growth in the agricultural sector and its ability to keep operating through the virus crisis. 

“While the income losses of the rural and urban poor are smaller compared to the non-poor in absolute terms, poor households are likely to find it harder than wealthier households to cope with such income losses.” 

That is in part because they already have significantly lower monthly incomes than their urban counterparts, meaning even a small reduction could push them closer to poverty. They are also more heavily reliant on remittances, a fact that Egyptian Farmers Syndicate chief Hussein Abdel-Rahman says is having a big impact on farming families. 

Abdel-Rahman recognizes “the decline in remittances would have a great impact on Egypt generally,” but says farmers and their families who constitute 55 million citizens, around 50% of Egypt’s population, are really feeling the pinch. 

“The plunge of the remittances led to weakness in the purchase power and a decline in the living conditions in the rural areas,” he told Egypt Today on Thursday.

The union boss also reports that the drop in remittances, and income more generally, has led to a decrease in cultivation with farmers planning to plant three instead of the usual five feddans (1 feddan = 1.037 acres) this year. According to Abdel-Rahman, reduced purchasing power is already pushing poor rural Egyptians towards low-quality imported meat, and lower crop plantings could drive food prices up further in the future. 

Another factor creating hardship for rural Egyptians are limits on cash withdrawals.  

“Also, farmers sometimes find difficulties in taking the remittances as he/she is not allowed [by the banks] to withdraw all [the] amount of the remittances at once from banks,” Abdel-Rahman said. 

 Read also: Lebanon and Egypt to Suffer Severe Impacts of COVID-19 Remittances Slump

 

The United States Is In a State of Crisis

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In the midst of a global combined economic and public health crisis, American stock markets have been doing rather well. The country has pumped trillions into its large corporations which has avoided a large-scale market crash such as that seen in 2008. But while Wall Street remains relatively intact, the rest of the country is spiraling into chaos due to several inter-connected crises.

Just a month ago it was incomprehensible that any news could top the historic global pandemic as 2020’s biggest story. But a wave of protests across the United States has highlighted that the country is suffering from more than just COVID-19.

Crisis in health

After months of economically painful lockdowns, curfews, and restrictions the US is reopening the economy even as its cases continue to climb. Wednesday, June 10, saw the two millionth COVID-19 case recorded. US President Donald Trump has pushed for reopenings even while many public health experts warn the nation might still be in the first wave of infections.

Those who died from COVID-19-related complications have disproportionately comprised minorities, and continue a sad historic trend of hitting the country’s Black communities the worst.

The unique nature of the US healthcare system means many will now face thousands of dollars in medical bills just as a “tsunami” of bankruptcies is due to hit in the aftermath of lockdowns that saw millions lose their jobs.

Crisis in inequality

The brutal death of George Floyd served as another painful reminder that the United States still has not created even a semblance of parity between Black and white people in the country. The death of another Black man in police custody triggered protests around the country, and a heavy backlash from the country’s elites.

Media and many officials instantly painted the protests as violent riots, and labeled protesters “looters.” State officials and media channels rushed to discredit the genuine demands of the mostly peaceful protests. The anti-racism demonstrations have since been used by agent provocateurs from groups advocating for a second civil war to stir up more violence and resentment between racial and economic sections of the population.

Pulitzer-prize winning reporter Chris Hedges has called the government response to protests “treason by the ruling class” and says a “mafia state” has replaced the country’s capitalist democracy. “We are serfs ruled by obscenely rich,” Hedges wrote in Common Dreams, saying the country’s wealthy constitute “omnipotent masters who loot the U.S. Treasury, pay little or no taxes and have perverted the judiciary, the media and the legislative branches of government.”

According to Hedges, who has seen several countries spiral into chaos and war, the US has only two possible paths left: Revolution or tyranny.

Crisis in the economy

The country’s shocking poverty has only worsened in a time of record highs in the country’s stock markets. The disconnect between main street and wall street is now painfully exposed as news of record highs in the NASDAQ feature on the same front pages as record numbers of deaths, unemployment, an approaching “avalanche” of evictions, and severe public discontent.

The crisis has similarly exposed the country’s nearly defunct labor laws to daylight as millions were immediately laid off from their jobs when lockdowns became a reality. Constantly clicking refresh on overwhelmed and continuously crashing state unemployment websites, citizens have started to realize that a welfare state is not a comfortable “handout” to those too lazy to work, as politicians have told them for years.

Instead people have been left to their own devices with little help from the government outside a one-time stimulus check that did not cover rent and expenses in most US cities. For decades Americans have swallowed tax cuts for big business, but the crisis has again proven that businesses actually have a responsibility to create as few jobs as possible to ensure maximum profits for shareholders.

Crisis in leadership

Amid the disintegration of the American social contract, US Donald Trump is rapidly undoing the post-WW2 era unspoken agreement that has sustained American hegemony. For decades, the US paid the most to global institutions such as the WHO and NATO. In exchange the US did not have to decolonize, was able to invade nations at will, and made its currency the favored exchange in the international market.

But President Donald Trump apparently considers that the country’s superior military strength alone should be enough to force the global community into compliance. By withdrawing funding from the WHO, pressuring NATO allies into paying higher dues, and sanctioning the world’s highest court, Trump is changing the image of the US from a benevolent global empire into a rogue state.

Vetoes at the Security Council are casually and repeatedly suppressing the will of the global community, while calls for mercy on states suffering under crippling US sanctions remain ignored. Trump has willfully broken the unspoken agreement between the US and the world, silently approved by Democrats who have signed off on every increase of the military budget, corporate hand-out, and even his wall on the Mexican border.

With America’s reputation badly damaged abroad and civil discord in the streets at home, the US is facing a historic crisis that could precipitate the final tumultuous decline of “global America” as we know it today.

IIF: Gulf Countries Facing Historic Economic Crisis

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The six nations that comprise the Gulf Cooperation Council (GCC) are facing heavy impacts from the coronavirus pandemic and a drop in oil prices amid a sudden demand slump. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates are in for a difficult period according to the International Institute for Finance (IIF), a global association of financial institutions.

The Institute had already announced that emerging markets are facing an “unparalleled sudden stop,” with capital leaving the economies of developing nations at never-before-seen rates. Capital is flowing from emerging markets to developed ones at over five times the rate at the worst point of the 2008 global financial crisis.

Triple threat

For the six GCC countries, local economies are suffering from a trifecta of bad news. Capital flows are moving to developed nations and oil revenues have cratered while tourism, hospitality, retail, and travel sectors are all facing unprecedented difficulties due to stringent COVID-19 measures.

Despite the overall relatively successful containment of the coronavirus, GCC countries are set to see a contraction in real gross domestic product (GDP) of 4.4% according to IIF predictions. The World Bank in 2019 had predicted GDP growth between 1% and 4% for most GCC countries, an improvement over the previous year. Oman was considered one of the Council’s members most likely to grow, with an increase estimated at 3.7% due to increased natural gas production.

Oil revenue and state budgets

But the coronavirus and an international “war” over oil prices means the region is now in for a contraction in GDP. The IIF is cheering on unpopular austerity measures as a means to stop deficits from growing as cuts in public spending “could more than offset losses stemming from reduced oil exports.” Even with unpopular and painful spending cuts, the Gulf Council’s aggregate deficits are expected to increase to 10.3% of GDP.

Oman, which the World Bank touted as the GCC country most likely to grow significantly in 2020, is now considered “an increasingly vulnerable spot in the region in light of its mounting debt.” The country could face an economic contraction of 5.3% while its deficit is likely to widen to 16.1%, according to the IIF.

Opportunity to reform?

The crisis also poses an opportunity to build up resilience according to Alain Bejjani, CEO of Emirati retail operator Majid al Futtaim. “In the coming two to three years, we’re going to see, certainly, a very, very large impact that’s going to be asymmetric, depending on the readiness of countries,” Bejjani told CNBC on May 5.

“I think this is a golden opportunity to really change, to reform and to transform our economies into more resilient economies that have (the) ability to bounce back faster,” Bejjani stated. The current crisis could easily accelate reforms and diversification that have resulted in broader opportunities and even improved conditions for women in GCC countries.

China Decouples GDP Growth, Success in Potential Global Paradigm Shift

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On May 22, the opening of the Chinese National People’s Congress featured a remarkable announcement from the Chinese Premier, Li Keqiang. In the midst of a global economic crisis the Chinese government has decided to not set a GDP target for the coming year. The move will confuse many local and provincial politicians, as growth was the key metric on which China’s success has been measured since 1990.

Without a GDP target there will be no pressure on politicians to achieve GDP growth at any cost, which has been the strategy of China and most of the world’s countries for several decades.

The Chinese appear to have recognized that chasing growth causes damage to the environment and reduces living and working conditions if used as the sole metric for national success.

Growth

The Chinese are certainly not planning to stop growing, but by deprioritizing GDP growth, the government will have the space to focus on improving healthcare and education and reducing ecological damage.

China is set to reach its target of eradicating poverty in the country in 2020, and the shift away from growth could easily mean that Chinese citizens will see a renewed focus on improving living conditions.

GDP growth has been the key metric for success that most countries around the world aim to achieve. But the link with GDP growth and improving standards of living is dubious at best.

The London Economic’s Jack Peat argues polling data shows that “GDP growth fails to deliver enhanced life satisfaction, poverty alleviation and remains environmentally disruptive.”

Incentives

The eternal push for economic growth brings with it incentives that ensure businesses and countries can never reach a satisfactory level of success, but instead must always keep “growing.” In the current economic paradigm, the idea of “next year’s GDP growth” invites direct foreign investment in a country much more than living conditions, security, or the education level of the population ever will.

The COVID-19 crisis has revealed that in a crisis, the use of GDP as the most important metric meant few countries had adequately prepared their healthcare system for an abnormal crisis.

It also meant governments had to force companies to produce important medical equipment and protective gear.

There had been no incentive to produce these items before, even though it would have benefited the public, as there is no reward for much but GDP growth.

Perpetual growth

The most important reason to decouple growth from success is the fact that we live on a planet with finite resources. Trying to realize infinite growth on a planet that is clearly and visibly struggling from over-depletion of its finite resources is a recipe for disaster. Climate researchers have argued that many highly-developed countries would actually benefit from degrowth.

For countries like China, there are many parts of society that still need growth. Better healthcare, education, and working and living conditions will likely become the next focus of China’s government after having dragged its population out of abject poverty.

If China stops using GDP growth as a metric for success, it could have far-reaching effects on our global economics.

A few countries have already signaled they will not consider GDP growth their key metric, but success in China could be a guiding light for other economies that are buckling under the need to forever grow.

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