Wednesday, March 19, 2008

Ethanol, ADM & the Hoover Institution

I've enjoyed reading columns written by Walter Williams for a few years now. He recently wrote one entitled Big Corn and Ethanol Hoax that I read.

Here are some of the factual highlights from the article. I have not gone to the lengths of checking the facts to see if they're correct or not, I'm just making the point that these are factual claims, not opinions, in order to distinguish them from some more material I will cite later in the post. If anyone who reads this can find issues with the accuracy of his factual claims, I'd love to hear about them.

  • Ethanol contains water that distillation cannot remove. As such, it can cause major damage to automobile engines not specifically designed to burn ethanol.
  • The water content of ethanol also risks pipeline corrosion and thus must be shipped by truck, rail car or barge. These shipping methods are far more expensive than pipelines.
  • Ethanol is 20 to 30 percent less efficient than gasoline, making it more expensive per highway mile.
  • It takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That's enough corn to feed one person for a year.
  • It takes more than one gallon of fossil fuel -- oil and natural gas -- to produce one gallon of ethanol.
  • Ethanol is so costly that it wouldn't make it in a free market. That's why Congress has enacted major ethanol subsidies, about $1.05 to $1.38 a gallon, which is no less than a tax on consumers.
  • Ethanol production has driven up the prices of corn-fed livestock, such as beef, chicken and dairy products, and products made from corn, such as cereals. As a result of higher demand for corn, other grain prices, such as soybean and wheat, have risen dramatically.

Interesting and grim information about ethanol. He goes on to point out that:

The top leader in the ethanol hoax is Archer Daniels Midland (ADM), the country's largest producer of ethanol. Ethanol producers and the farm lobby have pressured farm state congressmen into believing that it would be political suicide if they didn't support subsidized ethanol production. That's the stick. Campaign contributions play the role of the carrot.

Now, a portion of this claim is factual in that I assume a person could find the campaign contribution records to show how much and to whom ADM has contributed. The portion of this claim that isn't factually obvious (but still seems reasonable to me) is the interpretation of the motives behind ADM's giving.

Going on... I also enjoy reading columns by Thomas Sowell and Dinesh D'Souza. While reading stuff these two have written, I've noticed several times in passing their bio's always mention that they're both fellows or members of the Hoover Institution. I'd heard of the Hoover Institution enough times, but never knew exactly what it was, so I visited the wikipedia article for it linked to in the previous sentence to find out what it was.

Here's the ironic thing. When reading the wikipedia article, I notice that the Archer Daniels Midland Foundation is on its partial list of recent donors. I find that ironic, and a bit odd because Williams accuses ADM as being the top leader in the ethanol hoax. Being the top leader in this type of scheme does not seem to mesh with the kind of laissez faire economic ideas espoused by folks like Thomas Sowell of the Hoover Institution.

It is true that Williams, not Sowell, identified ADM as the top leader in this hoax... but it's not a stretch to assume that Sowell, a senior fellow at the HI, would feel the same way about the ethanol situation as Williams does. A person doesn't have to read columns written by those two for very long to find out that they share very similar opinions and philosophies when it comes to economics. Additionally, there's this quote from the wikipedia entry identifying Williams and Sowell as friends.

Since being a graduate student at UCLA, he has been a friend of economist, historian and columnist Thomas Sowell. Correspondence between Sowell and Williams appears in the 2007 by "A Man of Letters" by Sowell.

I just feel like I'm missing something. Why would ADM contribute dollars to an institution that espouses economic ideas and principles that fly directly in the face of the kind of behavior Williams castigates ADM for in his recent article?