World food crisis is real, energy policy a big reason

Last weekend the industrial countries' finance ministers met with the IMF and the World Bank, mostly about the world food crisis, which Bob Zoellick at the World Bank is convinced is more serious than whatever financial crises the international system is facing. He's right about that to a great extent, but since government policies are the primary causes about which anything constructive can be done, the assembled ministers didn't come up with constructive policies, simply a call for food aid from developed countries.

There are three main causes. As this Register editorial explains in part, there's been a drought in Australia, which has affected both wheat and rice supplies. China and India have been growing and building wealth, and their people are demanding and able to pay for more food, especially protein. And the U.S. and Western Europe, in a misguided effort to go "green," are subsidizing ethanol and biofuels, which raises corn prices and has all kinds of ancillary effects, including lower production of soybeans, more expensive meat, etc. In addition, most less-developed countries have price controls on basic foodstuffs, a sop to their urban populations but a huge disincentive for farmers to produce more.

The Western countries can't do anything about the drought or Chinese and Indian growth. They could encourage less-developed countries to end price controls, but it would likely fall on deaf ears. The most constructive thing they could do would be to end ethanol and biofuel subsidies (they aren't really all that green anyway when you consider all the costs) so farmers will start producing more for food than for fuel. But they don't seem to have the cojones, and all kinds of special interests profit from the subsidies, including Iowa farmer, Archer-Daniels-Midland and oil companies.

Food aid can be a stopgap, but it also is a disincentive for farmers in the ided countries to produce more, so it stifles real solutions in the longer run.