Slash and burn, SA’s food policy

There’s a ton of hype over the crisis in food prices. Apparently, food is too expensive. One would think this constitutes a “price signal”, but no, whenever something is too expensive or too cheap, NGO activists, special-interest lobbyists and populist media argue that “government must do something”. This is untrue as often as it is true that “government must stop doing something”.

In this case, it could probably stop slashing and burning our food.

I argued some of the reasons for food inflation in a previous post, and noted in particular that biofuel subsidies are perverse incentives, and eliminating them is the first answer to the misguided, knee-jerk question about what government can do. (The second is to drop all other tariffs, levies and subsidies, first on agriculture, and then on fuel, which constitutes a major input cost for producers.)

South Africa has a national biofuels strategy that is barely out of its diapers, complete with taxpayer-funded subsidies, imminent fuel-composition mandates and government-owned shares in private companies. (The company I have in mind, in which the government took a 25% stake in 2005, has been too busy spending taxpayer money to bother constructing a website.) So that first answer will probably be the last to be considered by the motley crew of interventionists, statists, socialists and marxists that populate our government. Reflection, review and self-criticism aren’t among their strong points.

Let’s see how the rich US is faring with biofuel. Two Washington Post writers today write of what they call ethanol’s failed promise (via Blue Crab Boulevard, which also has news of, wait for it, food shortages and panic hoarding, right there in the rich ol’ US of A). Neither of the writers lack in green credentials, and in fact, they cite environmental concerns and energy use before noting the impact on food supply:

These “food-to-fuel” mandates [i.e. ethanol subsidies and fuel composition laws] were meant to move America toward energy independence and mitigate global climate change. But the evidence irrefutably demonstrates that this policy is not delivering on either goal. In fact, it is causing environmental harm and contributing to a growing global food crisis…..

[…] It is now abundantly clear that food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources. Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm.

If the United States can’t afford ethanol subsidies, why on earth is South Africa hell-bent on burning its food stocks for fuel? When the biofuels strategy was first adopted, maize prices were low, and a surplus was being produced. Biofuel, said the government, would “soak up” that surplus. I’m no expert on the state of our agricultural markets or on prices of specific farm produce, but elementary economics suggests that if a surplus causes low prices, but farmers are not induced by the price mechanism to switch to different, more profitable crops, because they can sell their surplus to the government’s pet biofuels makers instead, this might explain why the supply of food is now under pressure.

Not to mention this business of “requiring huge amounts of energy”. My electricity will probably be cut two hours from now, for four hours. This can happen two or three times a week. What for? To produce ethanol? So we can run our cars on biofuel while the poor go hungry? So we can bash SUV owners for driving environmentally-friendly food-guzzlers?

Meanwhile, the UN too is dithering, waffling about how the Green Revolution that has halved world hunger since the 1960s was actually a failure, and we should all switch to organic farming. Yeah, that’ll help. Let the poor eat boutique honey. Douglas Southgate, of the Free Market Foundation, has a more elaborate take on its latest sustainable agriculture report (the link might only work for a week). And South Africa’s policy makers simply swallow what the green lobby and the UN wonks feed us.

Sometimes, the depth of insanity among government bureaucrats, whether American, South African, or global, is truly amazing. Slash and burn, guys. Go ahead. Good intentions never fed anyone, but then, hunger victims don’t vote.