Wednesday, December 23, 2009

Sugar, Corn, and Ethanol

Justin Rohrlich has written a great article on the state of corn and ethanol production in the United States. This ties in perfectly with my recent criticisms regarding our nation's food/farm policies, crony capitalism, and government intervention in the free market.

The thesis of the article is that companies such as Archer Daniels Midland (ADM) have bought off the government and received great financial rewards. Rohrlich cites a Cato Institute study that determined that "At least 43% of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs consumers $10."

This is the heart of crony capitalism--protectionist tariffs that have consequences, unintended or not. The consequences of protectionist tariffs on sugar have led to the increased usage of high fructose corn syrup and the use of corn-based ethanol. Both of these are driving factors in the continued overproduction of corn. This in turn perpetuates the cycle--again leading to the profitability of confined animal feedlots supplying poor meats to the American diet, the ubiquity of high-fructose corn syrup leading to a diabetes epidemic, while taxpayers foot the bill, largely unaware that their cheap commodities are in fact considerably more expensive then they realize.

The CEO of Archer Daniels Midland, Dwayne Andreas knows that ours is not a free market. He very clearly denied it. Rohrlich writes, "ADM's CEO, Andreas, doesn't seem to view our capitalist society through the same lens as most others. In one interview, he said, "There isn't one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not in the Midwest do not understand that this is a socialist country."

I've been saying the same thing for a while now too.

But Rohrlich's primary interest in the article is why Brazil is able to make ethanol a viable alternative to imported oil, while America is unable to. He argues that the government's corn subsidy led to the sugar tariff, which led to more cheap corn and corn-based ethanol, which then led to the tariff on sugar cane ethanol. It is an interesting analysis.

This is clearly a great evil being perpetrated. Were market forces allowed to operate without government manipulation, our nation would be a very different place. But of course, we get what we deserve, and our government has derived its power from the consent of the governed, so again, we deserve it all, but I suspect the tide is turning.

Oh, and as further evidence for the corruption of conservative politicians, the sugar tariff was given to us by none other than Ronald Reagan. Rohrlich writes, "Perhaps this is why a statue of Ronald Reagan stands at ADM headquarters. It is a token of appreciation from one free marketeer to another for promoting what is, essentially, a socialist policy."

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