The Everyday Economist

Today’s pictures are different. “This is a silent tsunami,” says Josette Sheeran of the World Food Programme, a United Nations agency. A wave of food-price inflation is moving through the world, leaving riots and shaken governments in its wake. For the first time in 30 years, food protests are erupting in many places at once. Bangladesh is in turmoil (see article); even China is worried (see article). 

So begins the story in The Economist.  Of course, this has led to outrageous claims that food “doesn’t spontaneously show up on grocery store shelves.”  It does, however, when the market is allowed to operate.  In reality, it is the fact that governments around the world have subsidized biofuels and established protectionist regimes to prevent the cheaper, foreign competition thereby pushing prices above the levels of affordability for many in the developing world.

There is little doubt that the market will continue to get the blame, while governments scramble to demagogue markets and offer solutions that involve more government involvement.  The solution is quite simple.  As Sean Corrigan explains, “Feed the world? — Then free the market!”

John Steele Gordon writes:

But so far, and despite waverings on the margins, it remains the fact that the Republican party, long the champion of protectionism, is now essentially the owner of the ideology of open trade, while the mainstream of the Democratic party, a party founded on that ideology and proudly identified with it for virtually its entire existence, is in the process of a stunning reversal.

True, Democrats do not flat-out oppose lower barriers to trade, or flat-out endorse explicitly protectionist measures. Instead, their views are usually couched in terms of environmental concerns and workers’ rights. Congressional Democrats, for instance, will claim that they are not against free trade; they just insist on provisos in free-trade agreements that no sovereign nation could possibly accept. [Emphasis added.]

HT: Bryan Caplan

Bloomberg reports:

The biggest obstacle to Brazil’s becoming a major supplier is a 54 cent-a-gallon tariff the U.S. imposes on Brazilian ethanol. The tariff was imposed in 1980 to protect U.S. corn- based ethanol makers from competitors in Brazil, who can make the fuel for half the price.

The president isn’t the only Bush promoting ethanol. So is his brother Jeb. Last year, Jeb Bush, who was governor of the sugar-cane-growing state of Florida from 1999 to January 2007, joined with Rodrigues, Lula’s former agriculture minister, to form the Interamerican Ethanol Commission in Miami.

The three-member commission, including Interamerican Development Bank President Luis Alberto Moreno, is considering offers of financing by the Brazilian ethanol industry. The group promotes the use of cane-based ethanol in the Americas.

On April 12, 2006, Jeb Bush sent his brother a nine-page report urging him to more than double ethanol consumption in the U.S. by 2015 to reduce dependence on oil from the Middle East and Venezuela.

Brazil’s sugar cane-based ethanol, which mills sell for as little as $1.14 a gallon, would be cheaper for Florida drivers than corn-based fuel from the Midwest if the U.S. scraps the tariff, Bush told ethanol producers in São Paulo in April.