Feed the World
At the beginning of the eighteenth century, fifty years before the time of Quesnay, Bandini of Sienna had shown, both from reason and experience, that there never had been a scarcity of food, except in those countries where the government had itself interfered to supply the people.
– Jean-Baptiste Say, Treatise on Political Economy
In recent weeks, pictures of people queuing restively beside piles of rice sacks have supplanted those of polar bears frolicking on icebergs as the iconic image of the global alarmists.
Having spent the last few years propounding the theme that agricultural commodities were headed for significant increases in price, it is at once deeply gratifying and yet curiously irritating to see an argument that was initially treated with a certain weary skepticism now becoming a conversational commonplace (though not over the dinner table, one hopes!) and yet one which is greatly misapprised.
As is by now well known, the current crisis has arisen, in part, because of the strain imposed by a global population which is not only increasing numerically but which is one, more importantly, beginning to enjoy an even more rapid rise in wealth, an advance which has brought with it an associated enrichment of dietary expectations and tastes.
Alongside this, there has been an ongoing depletion of the stockpiles built up during the lean years of subsidized overproduction. This has been accelerated by the signal shift to the subsidized overconsumption which the whole mummery of the biofuel movement represents — a folly akin to Joseph telling Pharaoh to set light to the surplus spilling out of his granaries, in order to economize on firewood.
However heart-rending the TV coverage, please don't misunderstand the situation: there is no need to subscribe to the views espoused the grant-grubbing and headline-hungry hordes of green St. Johns who shriek that modern industrial society has imprecated a divine vengeance upon our heads. This is the case whether their dire warnings take the form of pathological Carbophobia, "Peak Oil," or any of the other millenarian cults of Famine, War, Pestilence, and Death currently so fashionable among the nomenklatura.
Like many commodity businesses, the simple truth is that global agriculture has suffered for years from chronic underinvestment; a shortfall for which the politicians' feather-bedding of relatively well-off Western farmers is greatly to blame (not that such programs have been too effective in assisting its intended smallholder beneficiaries, rather than the giant agribusiness concerns, mind you).
With grants not grains the primary bounty of the harvest farmers, real food prices were driven down to levels not seen since Adam was expelled from the Garden of Eden. As a consequence, this loot of consumers' and taxpayers' pocket books discouraged the formation and deployment of the capital needed to maximize productive efficiency all along the supply chain. That this occurred well beyond the field boundaries can be surmised from a glance at the rocketing prices of agricultural inputs such as fertilizer and as the emergence of localized seed shortages will reveal.
Political short-termism, together with poorly defined or non-existent property rights, have led, in too many potentially fertile parts of the world, to a "tragedy of the commons," often leading to maltreated topsoil, which have been stripped of nutrients and allowed to become dispersed in the dust storms or flash flood run-offs which typically ensue. A little scrutiny will often reveal that, in many instances, the "desertification" which the Malthusians so frequently include in their litany of woe is little more than a characteristic failure of either collectivism or banditry.
Furthermore, Western "aid" — usually a naked ploy to buy the support of both foreign elites and domestic farm lobbies in the same cynical transaction — has stultified entrepreneurial efforts across the Third World, disincentivizing local development and demoralizing good husbandry in the recipient nations. This has perpetuated a sorry dependence on the self-serving ranks of professional, Dior-clad Donorate and has made misery chronic among the poor, especially where those poor are unfortunate enough to come from the "wrong" party or tribe.
Water, we are frequently told by the viridian Ultras, is in "short supply" — and this on a planet that contains the greatest known concentration of the stuff in the universe! The truth is that, for lack of capital investment, irrigation practices on the bulk of the world's acreage remain woefully primitive and wasteful and thus susceptible of a vast improvement in their efficacy. In addition, fertilizer and nutrient use is frequently far from optimal, meaning that chemical overkill can be as much of a problem as is a lack of effective treatment.
Finally, the witch-hunt against GMO organisms has become so febrile that starving Africans have even been denied emergency food deliveries by local overlords who are frightened of upsetting the prejudices of their Michelin-star, NGO, enviro-chic sponsors and thus of being cut off from other, more personally rewarding doles, if they demur.
While it is impossible not to sympathize with people complaining that their children's bellies are empty, it would nonetheless be a failure of rationality not to point out that that none of the political "fixes" so far promulgated in this crisis will do anything other than exacerbate the problem.
Moves to raise minimum wages and welfare payments, or to subsidize prices only increase demand. Capping prices and taxing or banning exports can only shift the burden to the very producers we need to earn the means to increase future output. Concluding primitive bilateral accords means the benefits of comparative advantage are being sacrificed — and hence real income is being reduced — by both counterparties to the deal.
As in all crises of scarcity, the cry has gone up to "Hang the speculators!" — figuratively, at least. Such hackneyed demagoguery overlooks the fact that the bulk of the money pouring into agricultural commodities is coming from retail investors and from pension and insurance funds — i.e. the switch out of crumbling financial assets is being undertaken on behalf of the ordinary person, in the hope of warding off some of the worst effects of rising food prices on both his daily standard of living and the value of his savings.
It is also fine for well-nourished, tax-sheltered Über-eaucrats like World Bank President Zoellick and IMF Chief Strauss-Kahn to call for hundreds of millions of dollars to cobble together a "New Deal" on food, but it should not be overlooked that this call is effectively one that Western taxpayers should face even more pain in order to mitigate past mistakes committed by the very same governing class which is now sanctimoniously affecting to save the world.
Though he is already being belabored by the self-haters in the left-wing commentariat, the Western consumer did not choose to implement costly and economically (energetically?) nonsensical biofuel policies; he had such ill-thought out intervention foisted upon him. It seems a little harsh, therefore, to castigate him for his selfishness, using the well-worn propaganda factoid that "an SUV tank full of biofuel requires enough grain to feed an African for a year," when it was Leviathan who forced him to put the blasted hooch in his tank, in the first place!
Having had to pay once to support such programs — rather than sensibly directing his money towards ensuring a greater, longer term supply of hydrocarbons (whether through action on the demand or the supply side); having been hurt a second time by the soaring grocery bills and higher fuel prices which have resulted, that same Westerner is now facing the prospect of being bilked thrice over in order to have those food prices preferentially bid up against him by the aid lobbies, again using his own money!
Though some lip-service has been paid to the idea (largely as a back-door means of criticizing the United States), no-one will seriously consider removing all artificial support payments for biofuel; no-one will be amenable to the repeal of all the arbitrary percentage-use mandates which undergird this structure; no-one will allow free trade in, e.g., cost-effective Brazilian sugar-cane ethanol in order to alleviate the current painful scarcity of grains.
Make fuel from corn, by all means, if the free market signals that this the most pressing need and, hence, the most lucrative use for the crop.
Otherwise, let farmers plant for food and feed and let the fruits of their labors circulate unhindered around the world, absent tariffs, quotas or subsidy payments, so ensuring both their most equitable distribution and the least possibility of giving off false signals and creating perverse incentives to mislead either consumers or producers.
Then, hand back to taxpayers the money that has been spared so as to reinforce the increase in disposable incomes that will arise from lower food prices — and so reduce industrial strife and political tension at a stroke.
Encourage also, the kind of long-term, free investment in oil, gas, and nuclear power which Dr. Birol of the IEA so bemoans "the market" will not provide, but which is actually being hampered by the joint efforts of autarkic (if not plain xenophobic) governments and the hateful shrilling of the eco-eugenicists who positively ache for great swathes of that "pest species," humanity, to perish and whose most fervent prayer is for "capitalism" to lead its plunge into the abyss.
Sadly, it is the world's loss that nothing like this will ever be undertaken.
Instead, the policies actually being pursued can only enhance scarcity, while the inability to finance such mechanisms of self-defeat honestly can only lead to a further descent into inflation — an age-old curse poised to undermine prosperity further and to seed the commonwealth with the kind of venomous discontent which is the wellspring of an even more self-destructive politics of fear, anger and hatred.
Feed the world? — Then free the market!
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.