UN Secretary General Ban Ki-Moon gave a frequently-discussed speech June 3rd on the global food crisis. I was a little surprised to find myself agreeing with some of his points. Yes, I admit most of the talk focused on increased government intervention. But some recommendations actually focused on so-called “free trade” policies. He advocated, for instance, reduced tariffs and limitations on food imports and exports. He also advocated removal of price controls. Tariffs and import and export restrictions make things more expensive for consumers. Price controls lead directly to shortages (this is even true with the WII, which has a price ceiling.) This is the human way: trade to get what you want. It has been for millenia, and it will be for the rest of this fallen world’s existence. Scarce resources must be allocated, and capitalism (individuals acting freely in a system based on private property rights) has proven time and again to be up to the challenge.
Ban Ki-Moon, unfortunately, does trust government with too much of the solution, when he admits that this is a case of “man-made hunger,” when in reality, it is largely based on government policies. Which policies?
1. Biofuels development. Significant portions of the world’s acreage has been enlisted to support a large, socialist energy project: that of biofuels development. This proven failure continues to consume large portions of the world’s crops.
2. The already-mentioned trade policies. Again, hats off to Ban Ki-Moon for publicly addressing these clearly. If followed, they will tend to offset the negative effects from the other policies supported by Ban Ki-Moon.
3. Government-sanctioned central banks. This huge price increase is largely a speculative effort, as many have by now discerned. What they may have not discerned is that this is not an inherent market defect, but one associated with loose monetary policies tied to government-sanctioned central banks, keeping artificially low interest rates around, encourage malinvestment to offset the huge economic drag of government costs and operation. It’s a sloppy way to run things, as the market is continually trying to correct itself.
Unfortunately, most still see monetary policy as independent of the business cycle (or even helpful in aiding the bad effects of the business cycle). This article talks about the role of bubbles in huge price increases, and also the role of a loose monetary policy in buildling a wealthy uber-class.
Most of Ban Ki-Moon’s solutions involve increasing amounts of government aid: food vouchers, fertilizers, seeds, for instance, in the short term, increased government food research, infrastructural investment, and government reinforcement of social safety nets in the long term. Will these work? They will certainly have the effect to slow economic growth in areas where it is needed most. Money will be diverted from where individuals would voluntarily spend it and put in areas where individuals would not through taxation and inflation.
There is a man-made (or government-made) global food crisis. But it does not follow that governments (those responsible for policies which are starving millions) are best suited for solving the problem. This is completely illogical.
But then again, since when is government logical?