Oct 2, 2012
Note: This article originally appeared at The American Interest on October 1, 2012.
As a way to save the planet, not many policies are worse than government-backed ethanol. It's bad for the economy, bad for the environment, doesn't reduce greenhouse gases, and has led to rapidly rising food prices.
Now a recent report links ethanol mandates to civil unrest, social upheaval, and even war.
As the report shows, rising food prices have been a significant contributor to global unrest, particularly in the Middle East. High food prices have long been associated with riots and civil unrest. In 1848, a wave of droughts and crop failures led to the toppling of governments throughout Europe. Hunger breeds desperation, and the inability of government to deal with the situation can lead to loss of confidence and legitimacy. All of this creates conditions that are ripe for an outbreak of mass violence, which can be triggered even by an otherwise unrelated incident.
The connection between food price spikes and civil unrest continues up to the present day. In 2008, a spike in food prices coincided with more than sixty riots in thirty different countries. After falling sharply in 2009 as a result of the Great Recession, food prices began rising again, reaching their previous peak towards the end of 2010. On December 17, 2010, Tunisian street vendor Mohamed Bouazizi set himself on fire in protest of government bureaucracy and regulation. His death sparked major protests, which soon spread throughout North Africa and the Middle East, ultimately leading to the overthrow of several governments in what became known as the Arab Spring.
Yet while Bouazizi's death lies at the origin of the protests, it is hardly sufficient to explain them. It is unlikely that the citizens of say, Yemen, took to the streets because of their concern for a street vendor in far away Tunisia. Nor was there anything new about the grievances each Arab country had against the corruption and repression of their respective governments. What was new was the increasing pressure these societies were being put under by the rising cost of food.
Food prices are now rising again and are now near the levels where they were at the onset of unrest in 2008 and 2010. As if on cue, on September 11, protestors stormed U.S. embassies in Egypt and Libya, killing U.S. Ambassador to Libya Chris Stevens and three others. Over the following days, riots spread throughout the Muslim world. Meanwhile, thousands of miles away, Chinese rioters overturned cars and burned businesses associated with Japan.
The two sets of riots appear to have little in common other than their timing. China's protests involved a dispute over an uninhabited island chain claimed by Japan, whereas the Muslim riots have been blamed on everything from an obscure anti-Islamic film to U.S. drone strikes. But when looked at in the context of high food prices, these events may only be the beginning.
What caused the food price spikes? The report concludes that both the 2008 and 2011 run-ups "can be linked directly to recent US governmental actions."
Specifically, the authors cite government ethanol subsidies and mandates as being primarily responsible for the background increase in prices. (The report also blames that bugbear of all prices increases, "speculation.")
Ethanol is in many ways a paradigm case of policymaking gone bad. Government mandates and subsidies for ethanol were originally sold to the public as a means of reducing consumption of gasoline by replacing it with a more environmentally friendly and "sustainable" fuel. Starting in the 1970s, the United States funneled billions to ethanol producers in the form of tax credits. More recently, the federal government has mandated that an increasing amount of ethanol be used as fuel for American vehicles (the tax credit for ethanol expired at the beginning of this year; the mandate remains in force).
As a result, about 40 percent of U.S. corn production is now being used to produce ethanol rather than as food. Not only that, but the government incentives are encouraging farmers to stop growing other crops in favor of the more lucrative ethanol, raising the prices of those commodities as well. The increased cost of feed also servces to raise the cost of feeding livestock, resulting in higher prices throughout the agriculture industry.
With the current drought throughout much of the U.S., prices are expected to head even higher. The United Nations has begged the U.S. Environmental Protection Agency to waive current ethanol mandate requirements on account of the drought, and several U.S. companies and political leaders have done the same. So far, however, their pleas have fallen on deaf ears."