Starving for Clean Air: The World Food Crisis

Farmers have incentives to sell for fuel rather than food. The April 19th, edition of the Economist magazine gravely warns of an imminent worldwide food crisis. They warn of price increases of 20 percent for such staples as rice, grain, and rice. In some of the world’s poorest countries, Bangladesh and Malawi, for example, prices for everyday meals may even double.

Without a doubt, bad government is partially to blame for the price increases. When oppressive and unaccountable governments prevent markets from operating by stealing from their citizens, cheap food cannot be the norm. Indeed, Nobel Prize winning economist Amartya Sen has famously declared that famines do not occur in democracies.

This adage may be true, but food prices are projected to skyrocket in democratic nations such as India, the UK, and even the US. Why is this so? The answer likely lies in the fact that bad government in these nations takes another form: undue interference in free markets. In democracies, governments tend to undertake populist price supports, trade barriers, and farm protection laws. For years in the US, the federal government has lavished money on farmers through farm subsidies that have served to create cheap food at the expense of taxpayers.

This year, however, the Economist has pointed out that a different sort of price support may be responsible for the current crisis. The culprit is the Western world’s desire for clean air. Specifically, our price supports for bio-fuels (ethanol), which turn corn, grain, and rice into cleaner burning fuels has shifted farmers from food producers to fuel producers. Since the best price for farmers selling their wares no longer comes from the eating public, but it instead comes from the driving public, the supply of grains available to eat has been greatly diminished, thus pushing up the price.

You should not be reading this without a sense of irony. In general, liberals like myself are pro-environment. We should, in cases like this, be reminded that environmentalism is a pleasure for the rich. The West is pro-environment because we can afford to be. Work by Don Coursey at the University of Chicago reminds us the environmental countries are rich countries and rich countries are environmental countries. Our demand for clean-burning bio-fuels has a direct impact on the dinner tables of the one billion people in the worldwho live on a dollar or less per day. Our demand for less asthma, longer lives, and fewer diseases should be directly linked to starvation in Bangladesh and Malawi.

So where do we go from here? First, we need to realize that it is terrible to be poor; you just cannot win. Second, we should allow markets to adjust back to equilibrium. Supply of food will expand because that is what happens in markets when prices increase. Eventually, the supply will increase enough to reduce prices to a non-crisis level. Third, and most important, Western governments should get out of the business of paying for our clean air. In the US, ethanol subsidies create undue pressure to grow corn for fuel at the expense of growing corn for food. Government should stick to the business of promoting long-term capital investments such as R&D and irrigation infrastructure.