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Leading Indicators of Revolt in the Middle East and Northern Africa: Corruption, Unemployment and Percentage of Household Money Spent on Food
Posted By Washingtons Blog On February 26, 2011 @ 11:30 am In Economy,Markets,War/Defense | Comments Disabled
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What determines which Middle Eastern or North African (MENA) countries will face revolt?
On February 3rd, the Economist came up with a list  of “vulnerable” countries based upon the amount of democracy, corruption and press freedom:
But the Economist index doesn’t take unemployment into account unemployment.
As Alternet notes :
Arab Labour Organisation (ALO) figures show that Arab countries have among the highest unemployment rates in the world — an average of 14.5 percent in fiscal year 2007/08 compared with the international average of 5.7 percent. The rates may even be higher if one accepts unofficial estimates.
Global risk specialist Mi2g notes :
There are a lot of “orphans” and most are young – 65 percent of the population of the Arab League is under the age of 30. Youth unemployment rates are exorbitantly high – as high as 75 percent in some countries like Algeria. While the informal economy provides partial compensation, this does not provide security; the Jasmine Revolution was triggered by the self-immolation of a young man, Mohamed Bouazizi, unemployed after police confiscated his wheelbarrow, used to make ends meet by selling fruits and vegetables.
On February 2nd, Nomura published a report  written by Steven Cook of the Council on Foreign Relations, arguing that youth unemployment and underemployment – along with a large proportion of youth – are primary factors driving revolt in the Middle East:
In both Tunisia and Egypt factors were at play which are also to be found in other economies in the region, notably:–An autocratic and corrupt regime [and] A significant―youth bulge and related unemployment and under-employment….
In other words, when there alot of young, unemployed (or under-employed) people, they might revolt.
Here are statistics from Nomura showing the percentage of youth under 15 years old and median age in years in the Middle East and Northern Africa:
|Country||Population Aged <15>||Median Age (2010)|
|Saudi Arabia||32.0 %||24.6%|
The index gives a 35% weighting for the share of the population that is under 25; 15% for the number of years the government has been in power; 15% for both corruption and lack of democracy as measured by existing indices; 10% for GDP per person; 5% for an index of censorship and 5% for the absolute number of people younger than 25:
As a side note, youth unemployment is rising globally. As the New York Times reported  last August:
Youth unemployment across the world has climbed to a new high and is likely to climb further this year, a United Nations  agency said Thursday, while warning of a “lost generation” as more young people give up the search for work.The agency, the International Labor Organization , said in a report that of some 620 million young people ages 15 to 24 in the work force, about 81 million were unemployed at the end of 2009 — the highest level in two decades of record-keeping by the organization, which is based in Geneva.
The youth unemployment rate increased to 13 percent in 2009 from 11.9 percent in the last assessment in 2007.
“There’s never been an increase of this magnitude — both in terms of the rate and the level — since we’ve been tracking the data,” said Steven Kapsos, an economist with the organization. The agency forecast that the global youth unemployment rate would continue to increase through 2010, to 13.1 percent, as the effects of the economic downturn continue. It should then decline to 12.7 percent in 2011.
In some especially strained European countries, including Spain and Britain, many young people have become discouraged and given up the job hunt, it said. The trend will have “significant consequences for young people,” as more and more join the ranks of the already unemployed, it said. That has the potential to create a “ ‘lost generation’ comprised of young people who have dropped out of the labor market, having lost all hope of being able to work for a decent living.
Data from Eurostat, the European Union ’s statistical agency, show Spain had a jobless rate of 40.5 percent in May for people under 25.
Indeed, as I have previously pointed out , youth unemployment is also very high in the U.S. And when those who have given up looking for work and those who are underemployed are taken into account (i.e. using the U-6 measure of unemployment), it is clear that the youth of much of the world are suffering Depression-level unemployment.
As many have noted, soaring food prices are also one of the main reasons for the revolts in Tunisia, Egypt, Bahrain, Yemen, Libya and elsewhere.Nomura pointed out  last September:
The World Bank (2009, p.11) estimates that nearly two-thirds of total income
is spent on food in the poor urban population of the developing world. High food prices reduce the ability to meet even basic needs and can lead to increased poverty and become a potential source of protests, riots and political tension ….
Alternet notes :
“Tunisians and Algerians are hungry. The Egyptians and Yemenis are right behind them,” Emirati commentator Mishaal Al Gergawi wrote in the Dubai- based newspaper Gulf News. “Mohammad Bouazizi didn’t set himself on fire because he couldn’t blog or vote. People set themselves on fire because they can’t stand seeing their family wither away slowly, not of sorrow, but of cold stark hunger.”
While Americans spend less than 15 percent of household expenditures on food, Egyptians spend 50%.
As UPI reports :
Just as in Tunisia, the spark was skyrocketing food prices — increasing at a brisk 17 percent annually in Egypt. That’s unhealthy in any economy but particularly one in which, as estimated by the investment house Nomura, on average 50 percent of household expenditures goes toward food. (In the United States, by comparison, food costs represent 14 percent — and falling — of the Consumer Price Index.)For that, Egyptians may in no small way thank the U.S. Federal Reserve and its policies of “quantitative easing” — known by most as “printing money.”
Nomura prepared  the following chart showing household spending on food as a percentage of income and per capita GDP (I’ve bolded information on the MENA countries):
|Rank||Country||Nomura’s Food Vulnerability Index (NFVI)||GDP per
capita Current prices US$
food % of total
As should be noted, there are countries outside of MENA with extremely high percentages of spending on food.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2011/02/leading-indicators-of-revolt-in-the-middle-east-and-northern-africa-corruption-unemployment-and-percentage-of-household-money-spent-on-food/
URLs in this post:
 Washington’s Blog: http://www.washingtonsblog.com/
 list: http://www.economist.com/node/18065663?story_id=18065663
 notes: http://www.alternet.org/food/149615/arab_regimes_fear_bread_intifadah
 notes: http://www.businessinsider.com/price-of-oil-food-crisis-arab-revolutions-21st-century-arab-awakening-prof-lehmann-imd-2011-2#ixzz1EXo7JHSB
 report: http://www.scribd.com/doc/48662769/Nomura-After-Mubarak-What-s-Next-2011-02-11
 reported: http://www.nytimes.com/2010/08/12/business/global/12youth.html
 United Nations: http://topics.nytimes.com/top/reference/timestopics/organizations/u/united_nations/index.html?inline=nyt-org
 International Labor Organization: http://topics.nytimes.com/top/reference/timestopics/organizations/i/international_labor_organization/index.html?inline=nyt-org
 European Union: http://topics.nytimes.com/top/reference/timestopics/organizations/e/european_union/index.html?inline=nyt-org
 pointed out: http://www.washingtonsblog.com/2010/10/is-unemployment-as-bad-as-during-great.html
 pointed out: http://www.nomura.com/europe/resources/pdf/080910.pdf
 reports: http://www.upi.com/Top_News/Analysis/Outside-View/2011/02/01/Outside-View-In-Egypt-an-uprising-FED-by-inflation/UPI-56571296566922/
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