Let Them Eat Bread

How Food Subsidies Prevent (and Provoke) Revolutions in the Middle East

For two days, people poured into the streets of Cairo, burning buses and trams, government buildings, and expensive cars. In Tahrir Square, troops fired tear gas at the demonstrators. Cairenes cheered from balconies and rooftops while their comrades in the streets below chanted antigovernment slogans: "You dress in the latest fashions," they roared at their president, "while we sleep 12 to a room!"

It was 1977, and revolution was in the air. When an already unpopular government tried to rescind food subsidies -- meaning massive price increases for staples like bread, rice, and cooking gas -- riots erupted. By the time they were over, hundreds of buildings were burned, 160 people were dead, and Egyptian President Anwar Sadat had learned an essential lesson for the modern Arab dictator: let them eat bread. Lots of cheap bread.

Change is sweeping through the Middle East today, but one thing remains the same: the region once known as the Fertile Crescent is now the world's most dependent on imported grain. Of the top 20 wheat importers for 2010, almost half are Middle Eastern countries. The list reads like a playbook of toppled and teetering regimes: Egypt (1), Algeria (4), Iraq (7), Morocco (8), Yemen (13), Saudi Arabia (15), Libya (16), Tunisia (17).

For decades, many of these regimes relied on food subsidies to ensure stability -- a social contract so pervasive that the Tunisian scholar Larbi Sadiki described it as dimuqratiyyat al-khubz, or "democracy of bread." But over the past several years, grain prices reached record levels, and these appeasement policies lost their luster. In Tunisia, pro-democracy demonstrations began in late December 2010 with protesters brandishing baguettes. In just a few months, a wave of uprisings rippled across the region, toppling Tunisian President Zine el-Abidine Ben Ali and Egypt's longtime ruler, Hosni Mubarak.

For decades, Middle Eastern regimes relied on food subsidies to ensure stability.

The revolutions, of course, are about more than just bread. Middle Easterners want basic human rights, dignity, and a chance at a decent future -- good jobs at livable wages. But when a government puts those things out of reach for the majority of its citizens, using handouts or subsidies as a substitute for democratic or economic reforms, bread becomes a powerful symbol of all they cannot have. Today, the protests have spread all the way to Yemen, where demonstrators are baking loaves of bread that spell out the command "leave" in Arabic. The message could not be clearer: the very commodity that Arab regimes once used to ensure obedience has now become a symbol and source of defiance.

The bread wars go back to the Cold War era, when the two superpowers wooed smaller nations with guns, grain, and other goods. It was during this time that many Arab regimes instituted social safety nets based on the Soviet model of centralized bread distribution. In 1950s Egypt, the populist President Gamal Abdel Nasser began the practice of subsidizing daily bread in exchange for social peace. "They adopted this because this was one way of buying loyalty from the society," says Ibrahim Saif, an economist and the secretary-general of the Economic and Social Council of Jordan. "It's the patronage system that prevailed for some time: I am the state, I take care of you, and you don't question my political behavior."

By the late 1970s, the International Monetary Fund (IMF) was urging Arab countries to rid themselves of the "subsidy burden." Cairo's 1977 "bread intifada" was only one of many across the region: throughout the 1980s, protests erupted in Morocco, Tunisia, Algeria, and Jordan whenever rulers tried to lift food subsidies. When Sadat was assassinated in 1981, his successor, Mubarak, remembered the lesson of the bread riots: he made sure that Egyptians had plenty of cheap, government-subsidized bread, and other Middle Eastern regimes did the same.

For the next three decades, U.S. taxpayers helped buy that bread. According to the Congressional Research Service, the United States provided Egypt with $4.6 billion in loans and grants under the U.S. Agency for International Development's Food for Peace program, most of it flowing between 1979 and 1997. Mubarak was not the only autocrat who developed a taste for cheap American wheat; Iraq's Saddam Hussein received billions of dollars' worth of surplus American wheat through grants and loan guarantees, and Jordan, Yemen, and other Middle Eastern countries got lesser amounts. For decades, the United States considered that a small price to pay for keeping friendly dictators in power.

But the cheap wheat came at a high cost: unemployment. The dependence on foreign largesse, coupled with the low price of global grains, encouraged many Middle Eastern regimes to hollow out their agricultural sectors. Throughout the 1980s and 1990s, trade liberalization programs pushed Egypt and Morocco, among others, into a dangerous dependence on cheap carbohydrates from abroad. Encouraged by the IMF and the World Bank to lift tariffs and import bans, and discouraged (or even restricted) from investing in their own agricultural sectors, they went from being net agricultural exporters to net importers -- especially of subsidized American wheat. In 1960, Egypt was producing enough wheat to be almost self-sufficient; by 2010, it was importing roughly half the country's total intake (nine billion tons), making it by far the biggest wheat importer in the world.

By 2010, the Egyptian government was subsidizing bread to the tune of about $3 billion a year, mostly by selling flour to local bakeries -- a complicated, inefficient system that lent itself to massive corruption. The higher global prices rose, the more incentive bakers had to resell subsidized flour and bread into the black market, where they could go for five or more times the subsidized rate.