Fuelish food follies.

By: Hoar, William P.
Publication: The New American
Date: Monday, May 26 2008

ITEM: United Nations Secretary-General Ban Ki-moon "said he would put together a special task force to help deal with the problem and called on the international community to help," reported the Associated Press on April 21. "He said the U.N. World Food Program plans to raise $750 million per year

to help feed 73 million people in 80 countries. 'We need a real world and not the world of economic theories,' Ban said. 'I will work on this right now with a sense of urgency.' Ban said the Millennium Development Goals--adopted at a U.N. summit in 2000 to cut extreme poverty in half by 2015--were not being met."

ITEM: "Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher," reported the Washington Times on April 23. Farmers here and abroad "have been burned by a tidal wave of investors and speculators pouring into the futures markets for corn, wheat, rice and other commodities and who are driving up prices in a way that makes it difficult for farmers to run their businesses."

"'Something is wrong,' said National Farmers Union President Tom Buis, adding that the [Commodity Futures Trading Commission's] refusal to rein in speculators will force farmers and consumers to take their case to Congress. 'It may warrant congressional intervention,' he said. 'The public is all too aware of the recent credit crisis on Wall Street. We don't want a lack of oversight and regulation to lead to a similar crisis in rural America.'"

ITEM: "Ration cards. Genetically modified crops. The end of pile-it-high, sell-it-cheap supermarkets," said an AP story in the London (Ontario, Canada) Free Press dated April 23. "These [are] possible solutions to the first global food crisis since the Second World War."

CORRECTION: Rising food prices have led to sticker shock at supermarkets in the United States, but the situation is even worse in the underdeveloped world. There have been food riots, for example, in Cameroon, Burkina Faso, Bangladesh, Indonesia, Haiti, and Mexico; export restrictions have been instituted in India, Egypt, and Vietnam; and rationing has been imposed in Pakistan and is being considered elsewhere. As many as 37 nations face food crises, says the UN Food and Agriculture Organization.

The suffering is real. However, all too much of it has been brought about by government intervention in the marketplace, and there will be even more fiscal pain and physical hunger if meddling governments continue to be part of the problem. So it is even more troubling when many so-called experts as well as the supposed representatives of the producers in the American farm sector seek additional intrusions by central governments as well as the United Nations.

When these experts tried their hands previously, they made matters worse. Expecting these same experts to come up with the right answers now is more than ludicrous. No matter how smart they are, they would not be able to track and react to the vagaries of the millions of decisions made in a vibrant market. It's impossible. The current shortages and price disruptions are not accidents: they were predictable.

Consider the government subsidies dished out for ethanol and other biofuels, accompanied by usage mandates. These measures were said to be necessary reactions to a climate-change emergency and an over-dependence on foreign oil supplies. Leaving aside the fact that those difficulties resulted from previously wrongheaded government policies, the responses exacerbated the problems.

Washington's style of assistance was well summarized in the Houston Chronicle by Ben Lieberman, who noted: "Thus far, help has come in the form of measures that have backfired and boosted prices, like the mandate that ethanol be added to the gas supply. Ethanol increases the cost of driving--which shouldn't really come as a surprise. After all, if it were cheaper, the government wouldn't have to mandate it in the first place. Plus, the diversion of corn from food to fuel use has raised the price of corn as well as many related items, like corn-fed meat and dairy. Ethanol is also heavily subsidized, to the tune of more than $1 per gallon. This year, the law requires 9 billion gallons be used, rising to 36 billion by 2022. So we taxpayers are paying for the privilege of higher fuel and food costs, and these costs are headed higher, along with the mandate."

Trying to generate more energy for vehicles through artificial incentives has resulted in less food for people. The producers of ethanol, fueled by government subsidies and mandates, removed about 550 billion pounds of corn from the market last year to manufacture fuel.

Driven by this enhanced demand, the price of corn has popped skyward--up by 300 percent since 2005, when Congress started to monkey in earnest with ethanol policies. Record corn prices encourage farmers--who are subsidized by the government--to favor corn over other crops. "Generous government subsidies for ethanol and mandatory minimum use of so-called 'renewable' fuels have removed from the world marketplace a quarter of U.S. corn, by far the largest source of this commodity in world markets," write Colin Carter, of the University of California at Davis, and Henry Miller, of Stanford's Hoover Institution. "It is the equivalent of the U.S. government mandating a huge crop failure in the Corn Belt."

But wasn't ethanol going to be the panacea? That was sure how it was sold. While ethanol is taking its lumps now, at least in some quarters, that wasn't the case when promoters were spinning tales of a cure-all through the willing handmaidens in the mass media, in particular through the major television networks. Nathan Burchfiel of the Washington-based Business & Media Institute, has reviewed the scores of such stories in the last couple of years:

   More than 82 percent of the coverage
   of the connection between ethanol
   and food prices failed to mention
   the government's role in creating the
   problem. In fact, much of the early
   coverage was demonstrably positive
   about ethanol's role. In May 2006,
   the NBC Today show praised ethanol.
   Host Katie Couric called it an "easy
   solution" for America's dependence
   on oil. She also called ethanol "the
   wave of the future."

   Dan Rather, once the anchor of
   the CBS Evening News, said on the
   May 7, 2006, 60 Minutes that ethanol
   is "cheaper and cleaner," neither of
   which has turned out to be true. Other
   reports have said ethanol provides
   more horsepower to car engines--like
   a World News Sunday report on
   March 25, 2007. A March 31, 2007,
   NBC Nightly News suggested ethanol
   is "supposed to help rescue America
   from dependence on foreign oil." The
   segment highlighted the benefits increased
   ethanol production held for
   corn farmers....

   As recently as April 11, 2008, ABC's
   20/20 characterized ethanol as a good
   replacement for traditional fuels.

The European Council established an objective of a 10-percent share of biofuels in transport fuel by 2020. The cries of the hungry will not cause the European Union to reconsider, according to a spokesman in late April.

The target may be European vehicles, but it is people elsewhere who are taking an even larger hit--in Asia, for example. As Indur Goklany writes in the New York Post: "What the U.S. ethanol subsidies do for corn, the European Union's biodiesel subsidies do for palm oil. E.U. policies stoke an artificial demand for biodiesel, leading to the clearance of high-biodiversity forests in Malaysia and Indonesia. In both the European Union and the United States, lands previously set aside for nature conservation are once again coming under the plow to meet subsidized biofuel demand."

One consequence of such policies is to make food too expensive for the poor. Then, with a crisis at hand, the United Nations leaps in with its inevitable share-the-wealth answer: require the better-off nations to hand over more to others. Indeed, there is already a goal at the UN for developed countries to commit 0.7 percent of their national GDP to so-called development assistance.

In practice, this would mean driving up the total of U.S. assistance to foreign nations--already the largest in the world--by around 400 percent. Although this would certainly be expensive, there would be little gain for the poor, certainly not in the long run. More power of course would accrue to the UN, even as more wealth would flow from the United States, which is no doubt the point. The would-be world government would like nothing more than to bite the hand that feeds it.

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