Tag Archives: Egypt

05.20.2011 | Population Pyramids

These graphics are wonderful!

Shaped sort of like a triangle because the elderly population is so small, this population pyramid for Egypt illustrates a youth bulge of men and women who are 15 to 29. The “bulge” represents 28% of the population–maybe 23 million people. For Jordan, Algeria, Iran, Yemen, Saudi Arabia and Bahrain the demographic picture is similar.

But the U.S. is different. Our graph has a baby boomer bulge. As you might expect, population pyramids for other developed nations resemble the U.S. graph. (You can open “Demographic Indicators” at this OECD site to compare.)

The Economic Lesson

What does a youth bulge imply? It takes us to jobs. The Washington Post reminds us that when freedom is limited, unemployment among so many young people fuels instability.

By contrast, for the U.S. and other nations with an aging population, entitlement support for the elderly is the challenge.

An Economic Question: We know that population matters…but how? How might the size of a country’s population and the relative size of its different age groups affect GDP growth (the value of a country’s production of goods and services during one year)?

Posted by: adminEcon
Tags: baby boomers, demography, Egypt, Middle East, population pyramids, youth bulge
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02.13.2011 | How Do You Disconnect the Internet?

As a Vodafone New Zealand customer, events in Egypt directed affected you. With a Cairo based call center that had to be closed, Vodafone said that people needing assistance waited 7 or 8 minutes for service that was directed elsewhere. According to The New Zealand Herald, Vodafone also had been instructed by the Egyptian government to “disconnect” its 31 roaming customers in Egypt.

How does a country disconnect? It can instruct service providers to shut down. In Egypt, that meant contacting 5 providers. For the U.S., it would be much more difficult, because in addition to the 10 firms that dominate the market (70% concentration), so many more businesses and people are involved.

An interesting fact: The Estonian parliament and France’s highest court have declared internet connection is a basic human right.

The Economic Lesson

The Organization for Economic Cooperation and Development (OECD) estimated the direct and indirect impact of the 5-day internet shutdown in Egypt. Directly, they estimate $18 million a day in lost revenue. Also though, the financial implications for tourism, inoperative call centers, and multinationals’ worries about future reliability are incalculable.

Posted by: adminEcon
Tags: Egypt, Estonia, France, internet service, outsourcing
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02.08.2011 | Happy Rice Farmers

With a typical Egyptian household spending 38.3% of its budget on food in 2008, you can see why soaring food prices could fuel turmoil. But what about the other side?

For Senegal farmer and trader, Ndeye Sarr Diop, rising rice prices were an opportunity. The world price is the key. Why grow rice if you can import it more cheaply? Moreover, why export it if no one will buy it? In 2008, with prices soaring, expensive West African rice became desirable. Responding to the incentive, Senegalese farmers started planting. As Ms. Dopp said, “I hope rice will make me rich.”

The Economic Lesson

Hoping to encourage production and support farm income, countries subsidize certain crops. As a result, the selling price remains artificially low. Developing world farmers who receive no subsidy cannot compete. President Clinton is quoted here, concerned that Haiti has to import rice because U.S. subsidies make U.S. rice cheaper than theirs.

Saying that free trade was the answer, 19th century British economic thinker, David Ricardo (1772-1823) would have reminded us of comparative advantage and how subsidies distort world markets.

Posted by: adminEcon
Tags: Egypt, food prices, rice, Senegal, subsidies, supply
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02.05.2011 | Military Business

Choosing between “guns and butter” (or missiles and margarine), national leaders think of the military for guns and the private sector for “butter.” Not Egypt, though.

As far back as the 1970s, when peace with Israel meant less to do for the Egyptian army, they redefined their role. According to an NPR report, the military decided to manufacture pots, process food, and make bottles for natural gas. A wikileaks 2008 diplomatic cable explained further that retired Egyptian generals ran “water, olive oil, cement, construction, hotel and gasoline” firms. The document said that the military built the road to Red Sea resorts while officers owned “large amounts of land…in the Nile Delta and on the Red Sea Coast.” (#j5)

Will the military’s economic stake affect their political decisions? Thinking of their opportunity cost, will they favor stability over turmoil? The wikileaks document says yes.

The Economic Lesson

Every economics text reminds us that scarcity necessitates choices. One traditional choice is between producing for the consumer and producing for the military. Whenever land, labor, and capital are allocated toward one, there is less for the other one. Choosing guns instead of butter was one reason that the former Soviet Union collapsed.

Economic growth, though, can enable us to produce more guns and more butter. One mid 1990s report suggests that fueling economic growth was the reason for the expanded role of the Egyptian military.

Posted by: adminEcon
Tags: Egypt, guns and butter, military, opportunity cost
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02.01.2011 | The Economic Response to Riots

When the rioting starts, where does economic activity stop?

In Egypt, gas and food were immediately affected. One owner of an Alexandria Mobil Station said he had not gotten a gas delivery for 2 days. The price of certain foods soared. One kilogram (close to 2 pounds) of beans moved from 35 cents to $1.70. Government subsidized bakers were also affected. No subsidies, no bread.

Meanwhile, large containers remained unloaded at major ports. Evacuating their employees, Coca-Cola and other multinationals, including banks, temporarily closed their offices. Volkswagen canceled deliveries and tour groups canceled their plans. Trying to prevent further declines, officials closed the Egyptian stock market while the country’s credit rating has been downgraded.

Still though, the one impact that could reverberate around the world has not happened. The Suez Canal remains open. A closed canal would add 10 days and 6000 miles to the length of oil shipments and further fuel an increase in its price. But, as one Forbes article points out, “floating storage,” the oil that is “sitting in tankers in the high seas,” would initially compensate for late deliveries.

The Economic Lesson

To get a picture of the government’s impact on the Egyptian economy before the riots began you might want to look at the Index of Economic Freedom where Egypt ranks 96 out of 179 countries. Here, the World Bank’s “Ease of Doing Business” index places Egypt at #94 from 183 nations. Last year though, it was #99.

Posted by: adminEcon
Tags: Egypt, food prices, multinational corporations, rioting, Suez Canal
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