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Ethanol – Government Induced Cronyism

Democracy and Power 114: The Power Players

Who actually controls the force of government?   Politicians and interest groups control the American political process.  Special-interest groups – big business, big unions, education, seniors, and a multitude of others - seek special privileges: tax breaks, subsidies, exclusive legislation, etc.  Interest groups give enormous money to political campaigns, and receive gigantic benefits in return.

Ethanol – Government Induced Cronyism

Two years ago, Al Gore, speaking before a group of green energy financiers, admitted the ethanol subsidies and mandates were bad public policy.  [Read:  Al Gore and Ethanol]

"It is not a good policy to have these massive subsidies for first-generation ethanol," Al Gore told a gathering of clean energy financiers in Greece this week. The benefits of ethanol are "trivial," he added, but "It's hard once such a program is put in place to deal with the lobbies that keep it going."
Just recently, the cost of corn, on the world market, increased by 25%, which, in turn, is causing hunger and death, especially in less fortunate countries.  America's ethanol subsidy and mandate are a major cause for the increased cost.  The Wall Street Journal reports:

… four of every 10 domestic bushels of corn into gas tanks. That's equal to 15% of international corn production, burned in internal combustion engines that could run on another fuel.

The problem is government-induced cronyism  The ethanol industry, Al Gore, Iowa's Senators Harkin (D) and Grassley (R), the Environmental Protection Agency (EPA) and many more political entities are inglorious participants.  The unintended consequences hurt the impovershed people of the world.  The intended consequences are for the politicians to obtain large campaign contributions in exchange for the ethanol industry (farmers and refiners) being subsidized by American taxpayers.  Additionally, government forces  Americans to use ethanol, when fueling their cars.   

Exasperating, there is also a complicit bureaucracy (the EPA), which is the crux of the Wall Street Journal article, "The Ethanol Election Delay." 

A year ago, intending to diminish world hunger, a free-market think tank and a hunger organization petitioned the EPA  to rescind the mandate requiring use of ethanol at the gas pump.  Specifically, the Competitive Enterprise and Action Aid folks noted that the EPA failed to consider multiple peer-reviewed studies documenting the link between ethanol and world hunger in its public health literature review, as required by law.   The petition was suppose to be ruled upon within 90 days.  Recently, the EPA asked for another extension.  As the Wall Street Journal noted – until after the election.

Academically, the general problem between cronyism and its consequence has been researched.  Matt Zwolinski, University of San Diego, exposes how the coercive power of government  exploits consumers and taxpayers and warns that more government regulation is not the answer. [See his excellent presentation at Learn Liberty

In conclusion, ending the ethanol subsidy and mandate in America would benefit the human well-being in America as well as the rest of the world.  

Additional posts: 

The Ethanol Boondoggle and the Hawkeye Handouts