Monday, 11 June 2007

In Passing

Could using ethanol lead to a sweeter outcome?

Instapundit links to a Popular Science article that explores one unintended consequence of increased ethanol production, higher feed grain prices. The article's second paragraph:

Corn is a mainstay of American agriculture— it’s an important ingredient in cereals and baked goods, and corn syrup is used to make processed foods like candy, chips and soft drinks. ... [bolding mine - o.g.]
Interesting little factoid there. Corn syrup is a sugar substitute.  Why is corn syrup so important in U.S. food production?  Because the United States keeps sugar prices artificially high, both through subsidies and tariffs.

The U.S. sugar program is a long-time sore point with a lot of different folks. Libertarians dislike it because it's a classic example of the government screwing up the market. Internationalists blame it for unfairly locking  third-world sugar producers out of the American market.  Candymakers hate it because they can't substitute corn syrup. The high sugar prices make them uncompetative, leaving them a choice of moving out of the country or going out of business. Food purists, horrified by the idea of substituting corn syrup for real sugar, say, "You may say it's the same, but I can taste the difference."  Environmentalists object because the program's production subsidies have encouraged increased sugar beet farming in unsuitable areas, resulting in environmental damage to the Florida Everglades. Populists point out that forty-two percent of the subsidy benefits go to just 1 percent of sugar producers, including $65 million to companies owned by just one family.  And then there's the everyday consumer, who pays more for anything that's sweet-- from a can of Coke to this morning's cinnamon roll.

With all those objections, you'd think the sugar program would have been dead along time ago.  But it's also the classic case of a small group of beneficiaries buying support from both political parties to insure continued existence of a program that benefits them a lot by extracting a little from everybody else.  And along the way the program itself has created a new group of supporters:  The corn syrup producers, who know they'd be out of business if forced to compete without the artifical barriers the program enforces.  As administrations have come and gone, and as different parties have controlled Congress, one constant has been the lack of interest by both Republicans and Democrats in driving a stake into the heart of this Count Dracula of government programs.

The rise of ethanol may signal a new opportunity.  The ethanol-driven corn price increases, with the associated price hikes for corn-based sweeteners, may finally lead enough people to say, often enough and loud enough, "Hey, if it wasn't for this program-- we could be using cheap sugar  instead of expensive corn syrup.  Time to kill it!"  Which might shift the political balance just enough to the the government to do the Right Thing, even if for the Wrong Reason.  Stay tuned.


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