Subsidizing Misery: Ethanol Subsidies Driving A Food Crisis

This is what happens when politicians acting on behalf of lobbyists try to steer the economy instead of free people making free choices in a free economy:

April 21 (Bloomberg) — Sometimes, bad economic policies create small annoyances. Sometimes, they lead to catastrophes.
For years, the U.S. has heavily subsidized the production of corn-based ethanol. The global impact of that policy is beginning to lean toward the latter category.
There is no question that subsidies have had their desired effect: An enormous share of the grain crop is now devoted to energy production. How much? A new World Bank report states that “almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for biofuels production in the U.S.” Go back and read that sentence a second time. It is stunning.
With the world population growing, and incomes rising, increased food production is necessary to maintain an acceptable level of basic human welfare. Since 2004, corn production available to individual consumers hasn’t budged.
While corn isn’t the only foodstuff out there, it is an important one, and a shortage has led to soaring prices for just about every grain. Again according to the World Bank, from February 2005 to February 2008, overall global food prices increased 83 percent.
That’s causing significant distress in the U.S., especially among seniors with relatively fixed incomes. In the developing world, the risks are becoming extraordinary.

Read the whole thing.

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  • http://Array Fred

    “With the world population growing, and incomes rising, increased food production is necessary to maintain an acceptable level of basic human welfare.”

    What exactly is “an acceptable level of basic human welfare”? And who gets to decide?

    Seems to me that this is all about survival of the fittest, and apparently quite a few people are not going to survive. I suggest that whoever cares to be a survivor make the necessary preparations. And that doesn’t include sponging off me. Bottom line: Can you hold onto what you’ve got?

  • ptschett

    It doesn’t help that farmers are actually planning to plant less corn this year compared to last year. Corn has high fertilizer demands, and with fertilizer being made from natural gas, the input costs are so high that the subsidies and high commodity prices still aren’t enough to encourage higher production.

  • anonymous

    Thank for posting this, Rob.

    There’s been something of a disconnect with bloggers. They don’t seem to notice how rapidly rising prices for food, fuel, utilities, etc. are combining to make life miserable for not just those on fixed incomes, but also for those who think of themselves as middle class. There will be a long hot summer to endure for much of the nation before we have the general election. Many people will find that cutting back on AC won’t begin to compensate for the rise in their other fixed costs. They’re going to be crabby, for sure. I don’t know why bloggers aren’t covering this more. I’d hate to see only the left take up this matter, and use it for the usual Marxist demagoguery.

  • jimmy

    Bush and the Republican Congress didn’t do the world any favors when they passed the Energy Policy Act of 2005.

    Ever notice that whenever the Bush administration does something stupid or destructive, the right-wingers blame it on “politicians”?

  • FlyOnTheWall

    Ever notice that whenever the Bush administration does something stupid or destructive, the right-wingers blame it on “politicians”?

    I glanced through your link and generally liked it, too much ‘green house gas’ stuff but a push to producing other sources like our own oil, wind, tidal, coal and nuclear. I’m a fan of diversity.

    What were your particular problems of the bill? It doesn’t explicitly push ethanol as hard as it got pushed, which is, I think, where the problem lay.

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