Ag Policy and the Great Ethanol Swindle

The agriculture lobby has an out-sized influence on the political process in the United States because of its history of aggressive lobbying, an accident of the electoral system, and a palatable storyline for the masses.

Agriculture is the ultimate commodity business. It has to be. Only the market for air is more biased against producers. If the supply of food ever falls below demand, or even stays particularly close to equilibrium, the country is in crisis. The government has a vested interest in making sure that farmers don't go out of business, but if food grows too expensive that's nearly as big of a political problem.

Farmers have a long history of organizing in order to secure government bailouts to protect them from drought and pestilence. And government has an equally long history of scoring political points by giving in.

Agriculture also benefits from the out-sized voice of rural states in the US Senate. But even in rural states like Nebraska, a surprisingly small portion of the population is actually involved in agriculture. The mascot at the football game may be a "Cornhusker", but the fans in the stadium have mostly desk jobs. Yet a winner takes all political system that is heavily dependent on monetary donations plays right into the hands of a highly organized lobby.

But perhaps agriculture's most effective resource is its storyline. The small American family farmer is a complete anachronism. Most of the country's food has been produced by corporations for years now, but the farm lobby has entrenched a poverty stricken farmer in America's collective consciousness.

The problem with ethanol is not that it takes more energy to produce ethanol than ethanol gives off when it is burned. Despite impossibly biased studies to the contrary, this contention has been substantially rebutted. Rather, ethanol is simply produced in the most inefficient manner possible.

Ethanol in the United States is made from corn. Nobody else in the world uses corn ethanol because sugar ethanol is much more efficient. Depending on how that difference is calculated, sugar ethanol can be eight times as effective. But the sugar lobby doesn't to make ethanol. That's because sugar from sugar cane is much better for ethanol than sugar from sugar beets. And sugar cane is subject to enormous import restrictions to protect domestic sugar production. So why do we make ethanol from corn instead of imported sugar cane? Because the corn lobby is one of the most powerful voices in Washington.

Corn and sugar growers don't always see eye to eye, but you can thank America's unique system for determining ag policy for the great ethanol swindle.

Just don't think ethanol can be saved by rationalizing our production. Brazil is the world's ethanol success story. Brazil makes ethanol from sugar cane and has a much better infrastructure for using ethanol that the United States. But Brazil's energy independence is owed to gigantic oil fields rather than humble farmers. Brazil won't be fazing out oil anytime soon, because it can't. Ethanol is interesting, but it's not a panacea.