Monday, May 05, 2008

Excessive government created vicious cycle

Published in The Tennessean, April 25, 2008

Excessive government created vicious cycle


The current "global food crisis" is not a crisis in its own right. It is a symptom of a broader intellectual crisis that has spawned a vicious cycle of increasing government intervention, here and abroad.

Excessive and poorly conceived government regulations, taxes and subsidies have created a cluster of crises, and now the fluctuating prices will be used as an excuse to increase government meddling even further.

We could start by looking at extreme cases, such as Zimbabwe, where Robert Mugabe has liberated his country from the status of net agricultural exporter and turned it into an aid-dependent exporter of hungry people. That's what you can do with just the right mix of bad economic policies and corrupt political practices. Third World governance begat and maintains our current portfolio of Third World countries.

With a little more effort we, too, could achieve that status. It will take awhile, but we do have some talented folks in Washington who are hard at work on it. Through the wonders of pseudo-science, they have converted most of us to the worship of the green goddess of global warming, which now explains all things. Who needs science when we have "consensus"? Those of us who actually understand something about mathematical models remain skeptical about their use in forecasting complex phenomena such as climate change and future economic conditions. But such "deniers" risk conversion by the sword or, worse, a loss of research funding.

Ethanol hinders progress

The green goddess now demands burnt offerings: We call it "ethanol." To ensure that we all practice what they preach, the pious folks in Washington have made our participation mandatory. The production of ethanol and other biofuels is promoted through subsidies, tax credits, grants, loans and import restrictions — burdens cheerfully borne by consumers and taxpayers. Corn producers are appropriately thankful, and vote predictably.

We are told ethanol will help us achieve energy independence and reduce the emission of unpopular gases. But it actually hinders both objectives. Further, ethanol is harmful to internal combustion engines and corrodes fuel-handling systems, including underground storage tanks. It is an expensive and wasteful energy source, so the government has to force us to use it in our gasoline.

This drives us back to the food crisis. With predictions that, within 10 years, ethanol production could consume as much as one-third of the corn crop, we should not be surprised that corn prices are shooting up. Resources are being drawn away from other uses, thereby driving up prices in other markets, particularly other foods. Elsewhere, people starve; but in America, we have enough food that we can distill it to fuel our cars.

Our premature adoption of the use of biofuels in America is wasteful and retards our technological development. Along with other government projects, it draws resources away from more highly valued products such as food, shelter and health care.

We were told that using ethanol would save us money, but like so many other "green" ideas, it's all moonshine.

Richard J. Grant is professor of finance and economics at Lipscomb University.

Copyright © Richard J Grant 2008