A couple of months back, media coverage on a natural disaster somewhere sparked a crisis of conscience and I proceeded to make a tiny donation to the World Food Program. The burden having been lifted from my shoulders, I proceeded to spend twice that amount at the pub. However, since then I have been distressed to learn that my piddling donation has become even more piddling as the result of a general inflation in food prices.
Now, if this were merely the result of the increase in the number of hungry mouths in countries such as China and India, then that’s one thing. But as former Mexican President Ernesto Zedillo explains, the challenge of increasing demand is exacerbated by biofuel policies in wealthy countries. According to Resource Investor, biofuel policies have accounted for as much as 60% of the growth in certain key commodities. US subsidies are even threatening the beloved tortilla.
Thankfully China is going to have a bumper crop year, but this is clearly not a long-term solution: the OECD expects the price of staple commodities to rise anywhere from 10-35% in the next decade.
So where do our political leaders stand on the issue? Obama has been supporting ethanol subsidies for some time, partly for energy security reasons and partly because it makes his “corn-rich” home state of Illinois more “money-rich.” Political pressure is mounting, however. On the whole, McCain has been more critical of the biofuel subsidies, but the Food vs. Fuel debate is a delicate one during an election year. In my home country, Harper’s 'double-win’ strategy is likely to result in a ‘double-lose’ for everybody not on the receiving end of the subsidies.
Simply stated, we’re seeing naked political pandering to farmers disguised in the rhetoric of security and environmentalism. This is unfortunate. It should not be difficult to accommodate high fuel prices in ways that do not contribute indirectly to food riots in poorer parts of the world (kites, for instance). Should we not be pursuing those avenues instead?
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2 comments:
Dave, I hope that donation was tax deductible.
Bio-fuels are one of the greatest examples of the unforeseen market distortions of over-active government policy. Worse yet, it's government policy motivated by skewed electoral politics. If Iowa wasn't the first presidential caucus (or if Canada's rural regions not so overrepresented in Parliament), then bio-fuels such as ethanol would never have taken off. Well written, Dave.
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