Food Riots Starting — Thank You, Greens.

An article from Deroy Murdock

Let me pass along a comment about the Murdock article by David Freddoso, which sums up my feelings nicely:

Our government’s negligence and perhaps even malicious misdirection of societal resources toward a worthless, unwanted product — ethanol — will cause millions of people to go hungry tonight.

This anecdote from today’s editorial is truly eye-catching:

Wal-Mart’s Sam’s Club has started limiting sales of rice because immigrants are buying all the rice they can and sending it to relatives in countries suffering from food shortages.

Deroy sums up:

If scientists can develop ethanol that neither starves people nor rapes the Earth, splendid. However, this enterprise must not rest upon morally repugnant, ecologically counterproductive, economically devastating, government-ordered distortions.

The way things are going, this could become the worst chapter yet in the sad, ruinous history of our bipartisan agricultural welfare programs. For those who write in and protest that free-market capitalism is an uncompassionate, un-Christian economic system, I submit that you are currently witnessing the alternative.

And our European friends (and their epigones and admirers among the Democrats) wonder why we free market capitalists are so bitterly hostile to socialism. There is your answer. Socialism means rationing. Rationing means artificial, counterproductive, and utterly unnecessary shortages of needed goods.

I need not multiply my examples endlessly, because there is not a single counter-example. In no case in history has a market dislocation produced the expected results promised by a socialist program. Franklin Delano Roosevelt, for example, was taxing a starving, unemployed nation, using that money to pay farmers to burn crops, to create a crop shortage in order than the price of food would be artificially raised above the natural market rate.

Whatever goods and services the people would have bought with the money they would have saved had the price of food dropped to its natural rate, where made more expensive, less available–a shortage. Burning crops also produced a crop shortage. Government interference in the price-structure of crops, in order to produce a good, ethanol, that no one wants and no one needs, produces a food shortage. Food shortages produce food riots.

Ethanol is like the clarified butter Hindoos proffer up to their idols: merely a sacred liquid proffered by the Gaia-worshipers to their insatiable industry-hating goddess. The scientific facts are relatively unambiguous: it take more energy to render corn into a gallon of ethanol than burning a gallon of ethanol will produce.

Ludwig van Mises explains the causal link between rationing and  shortages:

The government believes that the price of a definite commodity, e.g., milk, is too high. It wants to make it possible for the poor to give their children more milk. Thus it resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the highest cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop producing and selling milk on the market. They will use their cows and their skill for other more profitable purposes. They will, for example, produce butter, cheese or meat. There will be less milk available for the consumers, not more. This, or course, is contrary to the intentions of the government. It wanted to make it easier for some people to buy more milk. But, as an outcome of its interference, the supply available drops. The measure proves abortive from the very point of view of the government and the groups it was eager to favor. It brings about a state of affairs, which—again from the point of view of the government—is even less desirable than the previous state of affairs which it was designed to improve.

He goes on to explain why rationing in one area necessitates rationing in all areas:

Now, the government is faced with an alternative. It can abrogate its decree and refrain from any further endeavors to control the price of milk. But if it insists upon its intention to keep the price of milk below the rate the unhampered market would have determined and wants nonetheless to avoid a drop in the supply of milk, it must try to eliminate the causes that render the marginal producers’ business unremunerative. It must add to the first decree concerning only the price of milk a second decree fixing the prices of the factors of production necessary for the production of milk at such a low rate that the marginal producers of milk will no longer suffer losses and will therefore abstain from restricting output. But then the same story repeats itself on a remoter plane. The supply of the factors of production required for the production of milk drops, and again the government is back where it started. If it does not want to admit defeat and to abstain from any meddling with prices, it must push further and fix the prices of those factors of production which are needed for the production of the factors necessary for the production of milk. Thus the government is forced to go further and further, fixing step by step the prices of all consumers’ goods and of all factors of production—both human, i.e., labor, and material—and to order every entrepreneur and every worker to continue work at these prices and wages. No branch of industry can be omitted from this all-round fixing of prices and wages and from this obligation to produce those quantities which the government wants to see produced. If some branches were to be left free out of regard for the fact that they produce only goods qualified as non-vital or even as luxuries, capital and labor would tend to flow into them and the result would be a drop in the supply of those goods, the prices of which government has fixed precisely because it considers them as indispensable for the satisfaction of the needs of the masses.

But when this state of all-round control of business is attained, there can no longer be any question of a market economy. No longer do the citizens by their buying and abstention from buying determine what should be produced and how. The power to decide these matters has devolved upon the government. This is no longer capitalism; it is all-round planning by the government, it is socialism.

The central point here is so important that I must emphasize it:

Thus it [the state] resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the highest cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop producing and selling milk on the market.

The same logic that here applies to price supports applies with equal validity against any socialist scheme intervening at any point in the operation of the market place, if and when the end result reduces the profits of the marginal producer. The same argument applies to a price support, but with reverse effect: marginal producers are pulled away from needed good and into lines of production to produce a good the government wants, but the people do not, to the detriment of the goods they desire, and their resulting scarcity. Case in point: ethanol absorbs resources otherwise used for rice and corn, so was have more ethanol and less food.

You may wonder what the argument on the other side is, what the logical justification for price ceiling, or, by extension, any form of socialism might be. The answer is, there is none. All defenders of socialism do, when confronted by such proofs as these, is utter an ad Hominem. They cannot answer the proof, and so they call into doubt the good will and bona fides of the person offering the proof.

To support this contention, I merely ask that you look in the comments below. I will be pleasantly surprised, nay, I will be dumbfounded, if not one of my honorable opposition does not give in to the temptation.