Hunger's bad, but nothing compared to low food prices

By Brian Carnell
web posted April 10, 2000

The government has a message for the millions of Americans living below the poverty line – you're not paying enough for your food. Don't worry, though, in its effort to help out the little guy the government is about to rectify that situation and help raise some food prices to help out a few rich welfare recipients. Thank goodness somebody's looking out for the poor.

At a time when politicians are wringing their hands over the recent rise of gasoline prices to their historically normal levels, the government thinks that sugar prices are just too low. Low prices hurt large sugar producers in Texas, Florida and Louisiana. To remedy the situation, the government is considering spending $100 million to buy 250,000 tons of sugar and, hopefully, drive up the price of sugar (what they'll actually do with all that sugar remains a mystery).

How does the government decide when the price of sugar is too low? How did the United States get in this position in the first place? The answers to those questions involve a classic example of the problems with protectionism.

According to the reasoning behind the government's protectionist measures for sugar, the current price drop shouldn't be happening. For decades the government has bent over backwards, usually with taxpayer money, to help the sugar industry. First, it created barriers to make it extremely difficult for foreign sugar growers to sell sugar in the United States. Second, it provided hundreds of millions of dollars in loan guarantees for sugar farmers (the farmers use their future crops as collateral on the loans).

You do the math – the government makes sugar artificially expensive in the United States by limiting competition, and then it provides loans that make it all but impossible to fail at sugar farming. Those factors make sugar farming extremely lucrative and encourage ever more domestic farmers to abandon other crops in favor of sugar – since 1997, when farm commodity prices began bottoming out, U.S. sugar production has increased 25 percent.

So now, in order to correct the distortions created by their initial intervention, the government is forced to intervene further to maintain its sugar regime. But this is a self-defeating course of action. If the government does buy $100 million worth of sugar, sugar farmers will be reassured that the government will bail them out in the event of any fall in sugar prices, and likely crank up production even more.

And the best part – you and I pay for this expensive running in place with higher costs for food that uses sugar. Breakfast cereals, candy and other foods are all more expensive than they would otherwise be thanks to the government's sugar policies. It's more than a little obscene for the politicians who complain about the remaining pockets of hunger in America to turn around and support policies that artificially inflate the costs of food.

The solution to this problem, however, is rather simple. If things go as forecast, sugar prices will reach a mere 19 cents a pound by July and sugar farmers reliant on government welfare will forfeit tons of sugar. Let them. Don't prop up the price, don't offer more loans, and don't bail the sugar farmers out by simply buying and stockpiling sugar. Instead remove all existing barriers to sugar imports into this country, and let the market dictate the price of sugar.

The farmers will whine and moan about all of the money they'll certainly lose, but they've gotten a sugar coated deal for decades, while in exchange most Americans have had to pay higher prices for food they buy every day. That should leave a bitter taste in everyone's mouth.

Brian Carnell is the publisher of LibertySearch.Com.

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