Tuesday, April 1, 2008

Strike That!

So, I hear there is a strike coming up soon (on the 6th). Like all things hip and Egyptian, I learned about it through Facebook. I have nothing against that, in fact organizing 48,633 members wouldn't have been conceivable before Facebook. It just rubs my romantic, factory-floor, greasy, angry, strike image the wrong way.
While collective action of this nature is long overdue in Egypt, and "The Calls" are overflowing with bread lines stories to rival those of the good old days of the 70s, something has been bothering me about those strikes.
Namely the apparent relation between those strikes and the alarming rate of inflation (at some places in the world, a 12% inflation rate is called hyperinflation and warrants a genuine state of panic, but this is Egypt we're dealing with): I suspect that those strikes aren't only a result of inflation, but might actually be one of its causes.

To help me demonstrate, I put together this graph on the right. I assumed that the recent wave of strikes started in 2005 with ElMahala workers demonstrations. As you can see, the red line on top represents the Price Index, which is racing upwards. As a result of that, the real wages (the purchasing power of these wages - the blue line) is moving steadily downwards (looks kindda depressing!). This is expected; as prices go up, real wages go down.
The interesting thing however is the turquoise line in between. Wages actually increased! And at a seemingly accelerating rate. So the pressure on government actually worked? Well, if you mean by worked that it convinced them to print more money, then, yeah, it did!
I don't have any concrete information to back my conclusion, and I wouldn't claim that my analysis is conclusive (believe me its not, I have seen drunkards giving more rigorous economic analysis) . But, I think its worth the thought:
What if all the strikes succeed in doing is get the government to print more money to pay the angry mases, and push the inflation further up?
The Call is open...

P.S. I don't in any way, shape or form think that people shouldn't go ahead with the strike, or that it is a useless idea; its not. I just think that this is worth a look, and if this was the case, then maybe we need to define our requests from the government more precisely than just increase wages, instead of just trying each to fool the other!


Galal Mazhar said...

"Drunkards", huh! Ma 3aleina.

I see that the investment in your MBA has started to reap some results. You do graphs now, how fascinating!

Good point though, as usual ;)

Forsoothsayer said...

economist are u?

Wael said...

if that will make you consider my point, then yes!
Otherwise, I'm a guy who gets paid to recycle deep economic theories into a bunch of 3 bullets slides, and call it a deck.