Egypt, Inflation, Revolution

Inflation is, among others, conceived to be the biggest risk facing the current economy around the world. Or policymakers think so. Egypt is not an exception. Protesters are ostensibly demanding the resignation of President Hosni Mubarak, who has ruled the country for nearly 30 years. But we have to think twice what angered Egyptian people.

It's not necessarily wrong to claim that Egypt's tumult has been just inspired by the ouster of Tunisia's President Ben Ali, who ran the country for more than 20 years, in response to the uprising of protesters. There wouldn't be no protesters on the streets in Egypt without Tunisia's overthrow. But more careful consideration would be required to figure out the true cause behind the scene. That's inflation.

Economics isn't always the cause of everything. Nonetheless, Egyptian's grumble over corruption and stagnation under the prolonged reign of the current president wouldn't reach the turning point without skyrocketing inflation in the country. In fact, prices rose 13.5% in 2008 in the Middle East, a 13-year high since 1995. Among them, prices jumped 16% in Egypt in 2009, the highest in the region.

This all happened despite the good track record of Middle Eastern economy, whose growth doesn't pale in comparison with ASEAN countries, or even excels South America. It wouldn't be difficult to imagine that higher inflation, which lessens real income, leads to people's discontent.

This "inflation theory" doesn't apply to Tunisia, whose inflation has recently been lower than the region. Nevertheless, world policymakers, especially those in dictatorship, might want to learn very important lessons from the crisis under way in the Middle East.