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Thursday, April 24, 2008
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Unintended Consequences Are Often Not Unforeseen

I'm having a hard time not viewing politicians who vote for ethanol subsidies as murderers.  I don't mean this as a literary trick for the benefit of my blog readers, or some other sort of exaggeration.  I mean honest to goodness murderer, as if a Senator who voted for subsidies had put a gun to someone's head and shot them himself.

Food prices are skyrocketing, not just in our country (the growth is not as substantial here), but also in other countries.  The hardest hit are third world countries who import much of their food:

According to the UN Food and Agricultural Organisation, the price of wheat is more than 80 per cent higher than a year ago and corn (maize) prices are up by a quarter. Prices for vegetable oils are increasing at similar rates. The organisation also reported that the food price index, based on export prices for 60 internationally-traded foodstuffs, climbed 37 per cent last year, on top of a 14 per cent increase in 2006, and the trend has accelerated this winter.

The effects of this are already visible. Earlier this year protests erupted in Pakistan over wheat shortages and in Indonesia over soybean shortages. Egypt has banned rice exports to keep food at home and China has put price controls on cooking oil, grain, meat, milk and eggs. Food riots have occurred over the last few months in Guinea, Mauritania, Mexico, Uzbekistan, Senegal and Yemen.
...
Population growth and economic progress are part of the problem. Consumption of high-quality foods – mainly in China and India – has boosted demand for grain for animal feed. Add in poor harvests due to bad weather in places such as the US and high energy prices, and it is not surprising that prices are soaring. But the most important reason for the price shock is the rich world’s subsidised appetite for biofuels. Short-sighted policies are causing crops to be diverted to environmentally-dubious biofuels and, as usual, the burden is falling disproportionately on the poor.

Ethanol subsidies, which will do little to nothing to help our higher gas prices are literally killing people, either through food riots or starvation.  We are fortunate in this country to have the economic backbone to pay for higher food prices, even if it means we don't have as much money for other things.  Other countries aren't so lucky.  For them, our useless ethanol policies have real life consequences.

Do the politicians who voted for these subsidies and mandates even care?  Many of them are now talking about how these are "unintended consequences", as if that somehow should assuage their guilt.  But just because a consequence is unintended, doesn't mean it was unforeseen.  That's an important difference.  People said at the very beginning that this would lead to this exact result, including me.  So while they may not have wanted people to die, they certainly knew it would happen as a result.

And so knowing this, we have to come to the realization that the politicians who pushed for these ethanol mandates were perfectly willing to kill tens of thousands of people (or more), and cause hundreds of thousands (or possibly millions) more to suffer, in order to pick up the votes of a few thousand farmers in this country.  That is the math that they cared about.

Calling this an atrocity does not come close to being descriptive enough.

# Posted at 1:38 PM by Nick  |  Comment Feed Link 9 Comments  |  No Trackbacks

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Thursday, April 24, 2008 2:42:55 PM (Central Daylight Time, UTC-05:00)
Paul Krugman has the money quote on on this issue: "People are starving in Africa so that American politicians can court votes in farm states.”

I just took a gander at the senate votes that approved the current round of ethanol subsidies. There is only one senator from a corn producing state that voted against the bill. My favorite politician... Russ Feingold. We really should be proud to have that guy as our senator.

You libertarian types must have a love/hate relationship with Feingold. He should be your hero for things like voting against the patriot act and these ethanol mandates, but be your nemesis for things like his campaign finance reform bill.
3rd Way
Thursday, April 24, 2008 2:44:56 PM (Central Daylight Time, UTC-05:00)
We libertarian types have a love/hate relationship with everyone in government... its one of the joys of libertarianism.
Thursday, April 24, 2008 3:21:48 PM (Central Daylight Time, UTC-05:00)
love vs. hate
the same emotion
different weight
3rd Way
Thursday, April 24, 2008 8:20:50 PM (Central Daylight Time, UTC-05:00)
I thought it was supposed to be a hate/hate relationship :-)

On a related note, Sam's Club and Costco are limiting bulk rice sales. That's right; food rationing in America.
Thursday, April 24, 2008 9:45:50 PM (Central Daylight Time, UTC-05:00)
It's not government rationing at Sam's, so it doesn't count. It's the free market - it's actually a marketing scheme to let them increase demand so they can raise prices.

So on the scale of stupid, where do we place the belief that America's breadbasket would always overflow?
Thursday, April 24, 2008 10:14:11 PM (Central Daylight Time, UTC-05:00)
Still John... it's government interference in the free market which is causing the need for the rationing. The ethanol subsidies and mandates are propping up an ethanol market that otherwise wouldn't survive, and is making corn for ethanol look artificially more prosperous than corn for food.
Friday, April 25, 2008 8:49:59 AM (Central Daylight Time, UTC-05:00)
There's no need for the rationing. If Costco didn't have enough rice to sell, all they'd need to do is raise the price and people would stop buying it, right? This is pure hype. If the demand for rice goes up and supply stays the same, prices go up. It's not like rice is grown in the same spots as corn. No one is using rice for industrial ethanol, right? (Sake doesn't count.) Of course the government interferences are rotten through and through, but due to the pervasive nature of many governments interfering in many markets, where's that "free market"? What if their effects are quickly overshadowed by greatly increased demand?
Friday, April 25, 2008 8:55:21 AM (Central Daylight Time, UTC-05:00)
You get a couple things right and a couple wrong John. First of all, your assertion that rice shouldn't be affected by corn ethanol is not necessarily valid, because although you don't use rice for ethanol, rice may be acting as a substitute for corn as a food staple, and so the increase in corn prices is adding price pressure to rice. That's just a guess, but I think it's reasonable.

As to your assertion that Costco doesn't have to ration... I agree with you. Price increases are preferable to rationing in most cases. However, in today's regulatory and political framework... if Costco did increase the price to account for demand, then they'd probably be attacked for "gouging customers" and then investigated by the government. This way they only become another statistic of a company hit hard by ethanol mandates.
Friday, May 02, 2008 5:33:12 PM (Central Daylight Time, UTC-05:00)
Nick...

First-time comment. I've been thinking about this post for about a week.

At best - ethanol and other bio fuels are a stepping stone to fuel independence. At worst they are aoutright bogus.

Sure - food prices have risen by about two-fifths over the past year. Have you considered the impact of factors such as bad weather, population increases and greater wealth in emerging nations?

According to the International Food Policy Research Institute only about one-fourth to one-third of the recent inflation in food prices is a direct result of bio fuel initiatives.

Ehtanol and other biofuels are wasteful and they need to go away. I am not dismissing the impact that they have had on food prices - as they have had an impact.

I think you have overstated their impact.

Just my .02.

Tom
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