Saturday, April 05, 2008

20/20 Hindsight

Attention, world! Biofuels are good!

With that mandate from the United Nations, the world jumped onto the biofuels bandwagon and road it straight into hunger.

Attention, world! Biofuels are bad!

The free market rears its ugly head once again.

Corn can be turned into ethanol which can be pumped into car engines to make them go. The UN was keen on biofuels as a means of reducing greenhouse gas emissions. The non-green element was keen on reducing imports of foreign oil, since those foreigners who own the oil are a dangerous crew of thugs. The production of plant-based ethanol became the latest boom industry.

Farmers can grow only so much corn. When the demand for corn as fuel climbs, and the supply is fixed, then the price of corn rises. That's the most basic of economic principles, and one that the brain trust at the UN should have known about. Sadly, they must have slept through those lectures at university.

So, the farmer grows corn and sells it to make fuel. The chicken farmer has to pay more for his chicken feed and the cost of eggs goes up. The tortilla factory has to pay more for corn meal and the cost of tortillas goes up. Consumers on fixed incomes can't meet the higher prices so they go hungry. And there's nothing like a crowd of hungry citizens when it comes to stirring up unrest. Let them eat cake, indeed.

American farmers plant more corn, but that means less soybeans and wheat are produced. Farmers in other countries, like Brazil, pick up the slack and plant the soybeans. The problem is, they have to destroy the rain forest to develop arable farm land for those soybeans. The Amazon rain forest is the biggest sink for CO2 on the planet, so as the rain forest shrinks, there's fewer plants to suck up the carbon emissions and the atmosphere gets dirtier.

Last year, biofuels were good. This year, biofuels are a crime against humanity according to Jean Ziegler of the UN, and should be banned.

The free market will weed out the excess ethanol plants. The free market will reduce the value of biofuels if production costs cannot compete with fossil fuels. Biofuels will fall out of favor if they are not cost effective. That's more economics. It's not something that the UN knows much about.

No comments: