Is it immoral to use food crops for fuel?

The recent surge in production of bio-fuels (fuel derived from food crops such as corn, soy, and sugarcane) both in the U.S. and around the world has sparked a debate about whether such production should be promoted or even permitted. Aside from arguments about the energy efficiency of bio-fuels, the latest criticisms have arisen from the recent rise in prices of staple foods, such as the corn used to make tortillas in Mexico. Far away from the corn fields in Iowa, yet linked by the global economy, some have expressed anger over the rapid increase in cost of a commodity they purchase daily for their sustenance. In many third-world countries, citizens have been shielded from the full effects of these cost increases through government price controls and subsidies – but these programs are straining to maintain the illusion of cheap food in the midst of a worldwide jump in food prices. Ironically, in many industrialized nations, governments have been pressured to use tax dollars to “stimulate” the production of bio-fuels through grants for bio-fuel factories, infrastructure, and subsidies for farmers – with the intent of reducing our dependence on petroleum fuels.

Key Points

• Increased use of food crops for fuel production has reduced the amount sold for human consumption, resulting in price increases (supply & demand).
• Where bio-fuels have been more profitable than selling crops for food, some farmers have chosen to sell their crops to the fuel producers.
• Government price controls on food commodities have limited the profit possible to farmers, incentivizing them to seek other markets for their product.
• Government subsidies for bio-fuel production have distorted the economic value of food crops by creating an artificial demand (using tax dollars to stimulate production in the place of buyer dollars, which would demonstrate true demand).
• Acute shortages of subsidized bread, which is sold at less than one U.S. cent a loaf, have caused hours-long lines and violence at some sites in poor neighborhoods in Egypt in recent weeks.
• The supply of subsidized bread has been decreasing. Many people in Egypt believe subsidized bakeries sell some of their flour on the black market rather than make bread.
• Egypt has long been one of the top importers of U.S. wheat, but its U.S. purchases have been falling as it searches for cheaper sellers on the world market, where prices have tripled in the last 10 months.
• Some have criticized the use of food crops for fuel as “uncaring” and an example of “lopsided priorities”, due to the effect it has had on food prices, making it more difficult for poorer people to purchase basic foodstuffs.

Commentary

Not surprisingly, those who are suffering the consequences of government manipulation of the free market are the first to cry for the government to manipulate it further. This mentality believes that all costs are determined by the power of huge corporations, greedy middlemen, and government regulators – thus creating the illusion that the economy is simply a constant struggle between greedy businessmen and “the public” (represented by government protectors), waging price wars, with both sides continually seeking the upper hand. This illusion, during times of economic hardship, leads to the cry for government to be given greater powers to control commerce and trade, and to set “fair” prices.

What is not seen or heard in this debate is the fact that in a free exchange, the price of the product is decided mutually by the buyer and seller. Absent force, neither party can demand the other buy or sell the product – they must mutually agree. Thus, a general rise in the price of a commodity would indicate that someone is willing to pay more for it, and is doing so. Attempts to manipulate such an exchange through force will always result in its collapse, for the buyer will refuse to sell (reducing the amount of product available) and the seller will refuse to buy (creating a surplus in product available). These forces cannot be changed by government edict, and those who clamor for the force of government to be exercised to impose their opinions on what should be sold for what purpose and for how much will reap the consequences of history – shortages, recession, and general economic collapse.

In a real sense, what is being demanded by those who condemn the use of food crops for bio-fuel, is that each individual farmer should not be allowed to sell the fruits of his labor for the best price he can ask. He should be constrained to use his crops only for the benefit of those determined to be “in need” – by selling it only for food use and only at a price that is deemed “fair” by those who are demanding it from him. Such a policy can only be implemented through force, and has only one possible outcome. Eventually, the farmer will cease to produce when it is no longer profitable for him to do so under the coercive terms of the “public good” – and when that happens, there will be no food to buy at any price, no matter how great the need.

In the case of food crops and bio-fuels, both sides of the equation have been manipulated by tyrants – those who wish to control the direction of the fuel industry, and those who wish to mandate the value of a simple food product. Both distortions have aggravated what might have a been a simpler development in our modern economy. When men are free to exchange, temporary disruptions like those created by the invention of bio-fuels are quickly adjusted to, and self-interested people are quick to fill the needs and desires of others, for a profit. And that motivation, whether you revile it or not, is truly what fuels the economic activity of every person on the planet.

Action Steps

• Read “Capitalism and Freedom” by Milton Friedman (available in the F.C. Primer)
• Ask a local farmer what determines the sale price and use of the crops he produces
• Research the recent trends in the commodity markets – do you know the cost of the sources of your food?
• Write your congressman and ask his/her opinion about the U.S. Farm Bill
• Read “The Law” by Frederic Bastiat – How does the concept of “legal plunder” apply to the issues of production, free exchange, government subsidies, price controls, and other economic manipulation?

Principles: 6, 7, 8, 9, 11


References

Indian minister attacks biofuels
BBC - March 26, 2008
http://news.bbc.co.uk/2/hi/south_asia/7315308.stm

Egypt tries to tackle deadly bread crisis
CNN - March 4, 2008
http://www.cnn.com/2008/WORLD/africa/03/24/egypt.bread.riot.ap/index.html?eref=rss_world

Socialism vs. Capitalism: Which is the Moral System?

http://www.ashbrook.org/publicat/onprin/v1n3/thompson.html

The extraordinary level of material prosperity achieved by the capitalist system over the course of the last two-hundred years is a matter of historical record. But very few people are willing to defend capitalism as morally uplifting.

It is fashionable among college professors, journalists, and politicians these days to sneer at the free-enterprise system. They tell us that capitalism is base, callous, exploitative, dehumanizing, alienating, and ultimately enslaving.

The intellectuals’ mantra runs something like this: In theory socialism is the morally superior social system despite its dismal record of failure in the real world. Capitalism, by contrast, is a morally bankrupt system despite the extraordinary prosperity it has created. In other words, capitalism at best, can only be defended on pragmatic grounds. We tolerate it because it works.

Under socialism a ruling class of intellectuals, bureaucrats and social planners decide what people want or what is good for society and then use the coercive power of the State to regulate, tax, and redistribute the wealth of those who work for a living. In other words, socialism is a form of legalized theft.

The morality of socialism can be summed-up in two words: envy and self-sacrifice. Envy is the desire to not only possess another’s wealth but also the desire to see another’s wealth lowered to the level of one’s own. Socialism’s teaching on self-sacrifice was nicely summarized by two of its greatest defenders, Hermann Goering and Bennito Mussolini. The highest principle of Nazism (National Socialism), said Goering, is: "Common good comes before private good." Fascism, said Mussolini, is "a life in which the individual, through the sacrifice of his own private interests…realizes that completely spiritual existence in which his value as a man lies."

Socialism is the social system which institutionalizes envy and self-sacrifice: It is the social system which uses compulsion and the organized violence of the State to expropriate wealth from the producer class for its redistribution to the parasitical class.

Despite the intellectuals’ psychotic hatred of capitalism, it is the only moral and just social system.

This is one of the clearest, simplest, and most thorough essays on the difference between Capitalism and Socialism I have ever read. It also is an excellent defense of the morality of Capitalism - a defense that few intellectuals have ever proposed (other than Ayn Rand).

The legacy of Milton Friedman, a giant among economists

http://www.economist.com/business/displaystory.cfm?story_id=8313925

Directly or indirectly, Mr Friedman brought about profound changes in the way his profession, politicians and the public thought of economic questions, in at least three enormously important and connected areas. In all of them his thinking was widely regarded at the outset as eccentric or worse.

The first of those areas is summed up by “Capitalism and Freedom”, the title of a book published in 1962 (see our review). To Mr Friedman, the two were inextricably intertwined: without economic freedom—capitalism—there could be no political freedom. Governments, he argued, should do little more than enforce contracts, promote competition, “provide a monetary framework” (of which more below) and protect the “irresponsible, whether madman or child”.

To show where Mr Friedman thought the limit of the state should lie, the book lists 14 activities, then undertaken by government in America, “that cannot...validly be justified” by the principles it lays out. These include price supports for farming; tariffs and import quotas; rent control; minimum wages; “detailed regulation of industries”, including banks; forcing pensioners to buy annuities; military conscription in time of peace; national parks; and the ban on carrying mail for profit.

Celebrating Income Inequality

http://capmag.com/article.asp?ID=5005

Democrat and Republican candidates for President are debating one another on nearly every issue--but nearly all are united on one thing: America faces a crisis of "income inequality." The rich are getting richer, the refrain goes, while the poor and middle class are held back by stagnating wages, lousy schools, and growing healthcare costs. The solution, we are told, is more government intervention: spend more on education, provide "universal healthcare," and force employers to raise wages through minimum-wage increases and union protection legislation.

But all of this outcry is based on a false premise--that income inequality is bad. While some of the problems critics point to are legitimate concerns, income inequality is not. Income inequality is a natural and desirable part of a free, prosperous society.

In America, equality should mean only one thing: freedom for all. If business and wages were deregulated, we would see a dramatic rise in economic opportunity. If education and medicine were left free, with America's businessmen, doctors, and educators liberated to offer education and medicine at all different price points, we would see quality and price improvements like those for computers or flat-panel television sets. But these benefits of freedom require that we recognize the moral right of each individual to enjoy whatever he produces--and recognize that none of us has a right to something for nothing.

Great essay from Alex Epstein of the Ayn Rand Institute. I love topics like this that catch people in the contradiction of their thoughts. Most people instinctively condemn "inequality", but in this case, when they apply their minds to why that inequality exists and what is being proposed to "fix it", they find some difficult pills to swallow. This is yet another example of the two paradigms: one that is risk averse, wanting protection from one's own weakness, and the other that embraces risk and the responsibility that comes with it (and its ensuing rewards).

Too many people see only the rewards gained by some, and covet them. Not understanding why they have those rewards (e.g. proof of their profitable actions), they take on the mentality of the victim, saying that they were unfairly gained, either by unfair competitive circumstances or at the expense (exploitation) of the poor victim.

Introduction to Radical Capitalism - Part III

http://zambia.co.zm/articles/radical_capitalism3.html

There are so many people today who just invoke arbitrary rights without such recourse to logic and reality, which is why we have great confusion in society today, with rights being randomly granted to anything, from animals to trees to God and to just about anything else. Without integrating the factors that make the whole concept of rights viable, such irrational arbitrariness is inevitable.

In our upcoming constitution, we can already see this evidence of divorcing rights from an irrefutable foundation (property rights) which can be derived from common sense, as we have shown. We have had people suggesting all kinds of special rights based purely on their feelings of sympathy. Thus we are going to have special rights for the poor people, for example, which government will be obliged to meet by forcefully taking some property from those who are less poor.

There are no special rights that anyone can claim. Every human being has certain inalienable rights and these are built on the foundation of the principle of property ownership and not on whim or sympathy. This is why the dichotomy of “individual rights versus societal rights” is a false one based on a similarly false reification of society. And it is why the acceptance of property rights leads logically to the absolute acceptance of capitalism and the absolute rejection of socialism and all its variant or resultant forms that reject the sovereignty of the individual in his own life and over his own property (communism, fascism, etc).

This is currently the last of the series - I truly hope Mr. Chisala will continue this particular series of essays, as I have found them very approachable and useful in sharing with people who are misinformed about Capitalism. Chanda brings up the issue of rights in this essay - a crucial topic for any debate on government and the philosophical basis for any moral society. He demonstrates the relationship between rights and property, and shows how a philosophy's definition of rights shapes its entire societal system.

Introduction to Radical Capitalism - Part II

http://zambia.co.zm/articles/radical_capitalism2.html

You suggest that a better method is to simply be “pragmatic”. By this, I believe you mean that we should simply look at what works (or has worked) in practice, for our economic ends, and to follow that path. But pragmatism is a very poor way of guidance in life. Why? Let’s say we discover that corruption is actually good for the economy. Should we encourage corruption in the nation so that we could have economic growth? Your answer, I am sure is no. But why not? From pragmatism, it is not possible for you to simply reject corruption as a way to economic growth if statistics show that it is good for the economy.

The same can be said about slavery. One can possibly argue that some nations have had economic success as a result of using forced free labour (slavery). If pragmatism had had its way in this debate on slavery many years ago, the West would still be practicing it. Indeed there were pragmatists who saw nothing wrong with slavery since the slaves were foreigners and the human trade was helping their economy. But it was banned because a rational moral argument triumphed over mere pragmatism, as it always should. My argument against slavery is simply that you do not have the right to own or control someone else’s property – their mind and their body – and this is the same argument I use for capitalism. Pragmatism does not have a similar moral foundation to be a useful guide.

Bwana says that I should show how capitalism achieves the things that socialism wants to achieve, but in a better way, and so on. But why should I do that? Why should anyone, for example, spend time trying to show why freedom is better than dictatorship, or than slavery? That would be the pragmatic paradigm route, which we have already shown to be morally invalid. Since no one really needs to be convinced that freedom is better than slavery, or that theft is wrong, my responsibility is only to show how socialism is essentially equal to these vices (slavery or theft) – which infringe on property rights - and someone will easily make up their mind after they see this. If this is shown, there is no need to investigate whether it even has any advantages. The discussion simply closes there. Granted, some economists have shown that socialism is actually even counter-productive, but that’s just a wonderful coincidence of the nature of our benevolent universe or our good Lord – the important fact is that it’s immoral, just as slavery is immoral. Corruption has also been allegedly shown to be counter-productive from empirical evidence, but the issue still is that it is immoral, even if it was not shown to be counter-productive, and therefore it is not a valid option for a rational person or society to even investigate.

In Part II of his essays on Radical Capitalism, Chanda Chisala answers his reader's critical comments, particularly an argument for a more pragmatic approach to deciding their society's government. I am impressed with his clear, logical responses. These essays are a very good introduction to what Capitalism entails for those who are unclear or misguided on the subject.

Introduction to Radical Capitalism - Part I

http://zambia.co.zm/articles/radical_capitalism1.html

One of the most common comments one hears whenever there is a discussion on how Africa can solve its problems is this: “we have tried socialism and we have tried capitalism; neither of them have worked. It is time for us to try out a new system of economics, something invented by ourselves.”

This statement always sounds very attractive to many unsuspecting intellectuals and yet it is quite a meaningless statement. To break it down to essentials, what it actually means is this: “we have tried taking the rights of individuals to own their property from them, and we have tried letting individuals keep their rights of owning their property; neither has worked. It is time for us to try out a new system, something invented by ourselves.”

Unfortunately, there is no “third way”. This is a question of very basic logic. Either you allow a person to be an owner of his property or you forcefully assume ownership and control of his property (through government). The former is the essence of capitalism and the latter is the essence of socialism, whether you like those two terms or not.

This is part of an excellent series of essays on Radical Capitalism, written by an editor in Zambia. I stumbled upon these writings by accident, and quickly realized they were very articulate arguments in favor of capitalism. I was further surprised to find out that they were written in the context of a public debate happening right now in Zambia concerning the organization of their society and government! It seems they are in the process of creating a new Constitution, and this writer is advocating the adoption of capitalism as the moral basis of government for Zambia.

AMA is Wrong About Medicare

http://capmag.com/article.asp?ID=4793

Under current restrictions, it is illegal for the doctor to accept a patient's payment for any amount over the government's approved reimbursement for a service covered by Medicare.
The government also prohibits the patient from being reimbursed by Medicare if the patient chooses to privately contract for services with a doctor who does not accept Medicare.

This is a textbook example of why it's wrong for the government to be the middleman for your dollars. If you were freely exchanging your dollars for medical services, you would be within your right to choose which services, which provider (and thereby, what cost) you prefer. But it's not your dollar anymore, it's a dollar that has passed through the hand of government, somehow "sanctifying" it from the taint of profit or greed before being handed to the provider of services you desire.

Unfortunately for you, because you are not the one exchanging the dollar for services anymore, you no longer have the power to negotiate the terms of that exchange (unlike your ability to choose which breakfast cereal you purchase - ironically a real factor in your health). Your options for exchange consist of trying to game the tax system to your benefit, and punching a ballot every now and then to decide who will be your personal benevolent tyrant for a season.

Also working against you is the fact that since your money has been pooled together with everyone else's before reaching this point of medical services, it falls upon the representatives of the People to make sure your best interests (as they define it) are served in this exchange. Unsurprisingly, every incident that brings harm to one becomes a reason to legislate for all - since the only way, in this situation, to keep harm from coming to the one again is to codify the incident into preventative law, transferring the effects of that exchange from one to all. How else could a victim be protected if the terms of their exchanges are dictated by government?

The thousands of pages of directives and regulations dictating the use of what has now become "public money" on your behalf is no different than a hypothetical "government-sanctioned grocery list", posted on the doors of every store, specifying the items you may buy, at what price, and from whom. It would also be illegal in this bizarro world for the grocer to accept any of your personal dollars for his business with you would be funded by the state. Only a selfish, greedy rich person would ever need or want more than the benevolent tyrants had provided.

Would you be surprised to see the shelves eventually sparse and then empty for lack of products to sell? (as all the producers of products chose to do business elsewhere where they could set their own prices with the buyers) Would you be surprised to see lines of disgruntled shoppers, each carrying their apportioned groceries through the "free checkout line"?

We can't forget that medical products and services are not intrinsically different from any other product or service. They must to be bought and sold, and replacing personal choice with government fiat doesn't "wash the (supposed) stain of profit" from the product one buys. That doctor must choose to provide a service, just like the hairdresser - or he is a slave. Those drugs must be manufactured by human beings, who, devoid of the right to choose their incentive, will cease to do so and seek other means of providing for themselves. Treating medical care any different than "food care" results in a world where food is cheap (for the poor), plentiful (for the multitudes), and profitable (for the producers) - while medicine is expensive, scarce, and undesirable to produce.

And don't tell me health care is different because we need it to survive. Starvation is worse than dying from cancer on my list...

The Fear Factor

http://www.lewrockwell.com/paul/paul402.html

While fear itself is not always the product of irrationality, once experienced it tends to lead away from reason, especially if the experience is extreme in duration or intensity. When people are fearful they tend to be willing to irrationally surrender their rights.

Thus, fear is a threat to rational liberty. The psychology of fear is an essential component of those who would have us believe we must increasingly rely on the elite who manage the apparatus of the central government.

A short essay by Ron Paul that highlights the consequences of speaking, legislating, and governing from a perspective of fear. Fear is the hallmark of socialism - the driving emotional force that motivates people to seek protection from benevolant tyrants - those who would promise that nothing bad will ever happen to good people under their watchful care. Stimulated by crisis, both real and perceived, they advocate the restrictions of freedoms for everyone because of the criminal acts of a few. The mindset always boils down to this - prevent anyone from doing anything bad before they get a chance to do so, and forcibly ensure that everyone does good before they fail to do so...

The Five Stages of Counterfeiting

http://www.lewrockwell.com/north/north550.html

A truly serious counterfeiting operation would in fact plan to do something very similar to what Mr. Heath said a counterfeiter would not do – just not in a single step. The goal of a serious counterfeiting operation would be to persuade the public to use its money rather than the official bills it originally copied when it designed its original fake plates. Its goal would be the replacement of the original official bills with its own bills, making them official in the eyes of the public.

This has been the primary goal of central bankers ever since the creation of the Bank of England in 1694

Gary North's essays are always very detailed and thorough, if a bit lengthy. This article covers a very broad scope of economic history and describes the process of converting generations of people to treasure a currency once thought to be worthless. It covers precious metal debasement, fractional reserve banking, fiat money, central banks, and inflation - all in the context of a larger move to legitimize a counterfeit currency.

Economists on the Loose

http://www.CapMag.com/article.asp?ID=4991

First, let's establish a working definition of free markets; it's really simple. Free markets are simply millions upon millions of individual decision-makers, engaged in peaceable, voluntary exchange pursuing what they see in their best interests. People who denounce the free market and voluntary exchange, and are for control and coercion, believe they have more intelligence and superior wisdom to the masses. What's more, they believe they've been ordained to forcibly impose that wisdom on the rest of us. Of course, they have what they consider good reasons for doing so, but every tyrant that has ever existed has had what he believed were good reasons for restricting the liberty of others.

Tyrants are against the free market because it implies voluntary exchange. Tyrants do not trust that people acting voluntarily will do what the tyrant thinks they ought to do. Therefore, they want to replace the market with economic planning, or as Professor Blinder calls it — industrial policy.

A short and simple essay on the basic philosophy of the free market economy vs. central planning/industrial policy. I love Walter Williams ability to concisely demonstrate the mindset that inspires both the capitalist and socialist movements.