How green fuels are starving the world – MoneyWeek

Insomeplaces,suchasArgentina,Egypt,India,Kazakhstan,orIndonesia,forexample,governmentshaveimposednewexporttariffstoprotectthedomesticfoodmarketfromrisinginternationalpricepressures,thussettingthestageforendemicshortages。

Inotherplaces,suchasRussiaorChina,thingshavegonemuchfurther,andexporttariffshavebeencoupledwithpricecontrolsonbasicfoodssuchasbread,milk,andeggs。

TheMexicangovernment,ontheotherhand,hasreactedbymixingonebadidea—pricecontrolsforfood—withagoodidearatheralittletoolate:loweringimporttariffsforvariousagriculturalproducts。

GovernmentsinseveralothercountriesfromLatinAmerica,Africa,Asia,andEurope,includingtheEuropeanUnionhaveloweredorevensuspendedimporttariffsforvariousagriculturalcommoditiescomingfromcertaintradingpartners。

Whilethisisfarfromtheidealofanimmediateabolitionofalltariffs—anditsasdistortionaryaspoliticallymanagedtradecanbe,evenintimeofcrisis—itiscertainlyasmallstepintherightdirectionandmighthelpensureasmoothersupplyoffoodinsomeplaces。

Allinallhowever,thereseemstobelittlethatcanbedoneintheshorttermfortheworldspoorestpeople。

Thehundredsofmillionsofpeoplewholiveontheborderofpoverty,whospendalmostalltheirincomeonfood,arenowfacedwiththethreatofstarvation。

Already,inmorethanseventeencountriesaroundtheworld,thehungrypoorhavesparkedriotsandcivilunrestinthewakeofhigherfoodprices。

Theangerfeltbytheseroughbutfragilepeople,thefruitofdesperationbornoutoftheusualmixtureofpovertyandoppressionthatcharacterisestheunderdevelopedpartsoftheworld,cansometimesbemisguided;butinitsmostfundamentalexpression,itisjust,courageous,andevencommendable。

Buthowdidthishappen?

Withhundredsofbillionsofdollarsspenteachyearondevelopmentaidandvariousanti-povertyprogrammesintheso-calledthirdworld,withanarrayofgovernmentalandintergovernmentalagenciesdesignedtolifttheplanetspoorestoutofearthlymisery,andwithnonotablenaturaldisasteraffectingcropsandagriculturalproduction,howcanafoodcrisisthatthreatensmillionswithstarvationhavecomeabout?

Undoubtedly,risingpricesforoilandoil-derivedfertilisersdidhaveanimpactonfoodprices,butoilpricescannotentirelyaccountforthesoaringpricesobserved。

Itiscertainlytruethatincreaseddemandfromemergingmarkets,suchasChinaandIndia,hasalsoputpressureonprices。

Moreover,theincreaseddemandformeatanddairyemanatingfromthesecountries—aresultofdietsmovingawayfrommoretraditionalvegetarianfoods,infavorofmorewestern-stylemeals—musthavetriggeredaprocessofadjustmentalongthecapitalstructurethatrequiressometimebeforeitcansupplytheadditionaldemand。

However,thepressurefrombothhigheroilpricesandhighergrainconsumptioninemergenteconomiespalesincomparisonwiththerecentincreaseofindustrialdemandforgraintoproducevarioustypesofbio-fuels。

Thus,almostalladditionalUScornproductionbetween2004and2007,forinstance,hasbeendivertedtotheproductionofethanol,whiletheEuropeanethanolproductionmorethantripledduringthesameperiod。

Theincreaseduseofgrainsforethanolproductionhasledtoafallinthesupplyofgrainsrelativetooveralldemandduringthelastsevenyears(withtheexceptionof2006,whichwascompensatedbytheuseofgrainstocks,nowatthelowestlevelgloballyinaquartercentury)。

Thissituationisnot,however,anaturalmarketphenomenon,butthedirectresultofvariousgovernmentprogrammes—usuallyintheworldsmostdevelopedeconomies,althoughdevelopingcountriesarecatchingup—thataimtopromotemoreenvironmentally-friendlyenergytechnologyorenergyself-sufficiencybysubsidisingandmandatingthediversionofagrowingpercentageofagriculturalcommoditiessuchascorn,sugarcaneorwheat,totheproductionofbio-ethanolandbio-diesel。

Theincreasedproductionofbio-fuelsintheUnitedStates,Brazil,Europe,andelsewhereisthuseffectivelyobtainedattheexpenseoffoodproduction—or,asitturnsout,potentiallyatthecostofthelivesofmillionsoftheworldspoorestinhabitantswhoarenowpricedoutofthemarketforfood。

Contemplatingthegrotesquepotentialsideeffectsofbio-ethanolsubsidiesintheworldsmostdevelopedeconomiesisalmostunbearable。

Whileeveryoneisaffectedbyhigherfoodprices,forsomepeopletheymeanonlygivingupanewpairofshoesoranightout。

Forothers,however,themorecostlyfoodputstheirverysubsistenceintoquestion。

Nodoubt,thepoliticianswhocameupwiththeideaofsubsidisingthediversionofgraintotheproductionofbio-ethanoldidnotintendtostarvetheworldspoorestpeople;butthefactthattheconsequenceswereunintendeddoesnotabsolvethemofresponsibility。

ByBogdanC。

EnachefortheMisesInstitute。

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