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.
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