Ethanol Subsidies

By Ronald R. St John

The world food crisis is creating dramatic evidence of why centralized government economic planning is a bad idea.

The predictable effect of diverting so much corn from the food market is a dramatic increase in the price of corn. Corn has tripled since the 2005 Act, and other grain prices have increased as well. Meanwhile, with few vehicles using ethanol as fuel the environmental benefit of the subsidies and production mandates barely registers.

When ethanol is truly a more efficient means of producing energy, then the market will produce ethanol without any subsidies or pronouncements from the government. If the production requires subsidies, then it is not yet efficient. In this example, trying to play politics with the economy is literally creating a humanitarian crisis with a threat of famine and political unrest.

With the failure of socialism in Russia, we already have examples of why central planning does not work as well as the free market. With the current food crisis brought on by the ill-advised ethanol subsidies we have an immediate and vivid example of what can go wrong when politicians abuse the spending/borrowing power of Congress to manipulate the market. We need to repeal the ethanol subsidies and production mandates on an emergency basis, and use this as a teaching tool for the hazards of government intervention in the economy.