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Sunday, September 13, 2009

Where's the Sugar?

Allegedly, there's a sugar shortage.

Due to lobbying by US sugar farmers, there's a cap on imported sugar. It's not a tariff, but an explicit cap (effectively an infinite-percent tariff).

Now, US food manufacturers have a problem. There's a shortage of sugar!

Due to another stupid law, a lot of corn is now used for ethanol. This leads to a shortage of "high-fructose corn syrup".

This "shortage" is entirely created by the State protectionist policy. Sugar prices in the USA are higher than prices outside the USA.

A pro-State troll says "Import quotas are good. That's encouraging farming in the USA."

The fallacy is that, without the import quota, the sugar farmers would be less profitable. The artificially high price for sugar encourages them to grow sugar instead of something else. It's the usual "seen vs. unseen" fallacy. People pay the cost of the State policy via higher prices for sugar. You don't see the things that the sugar farmers would be making instead.

For example, it might be more efficient to grow and export wheat and buy sugar, than to grow sugar. The State causes market inefficiency.

Also, the skyrocketing sugar price could partially/mostly be due to money supply inflation. Other causes than money supply inflation are always blamed for price inflation.

Technically, food manufacturers don't mind high sugar prices. With a State-backed monopoly/oligopoly, they merely pass the cost on to customers as higher prices. However, they need to explain the sudden higher prices to customers.

Shortages do not occur in a really free market. State restriction of the market is necessary to create shortages. The sugar farmers are receiving a massive State subsidy via the import cap. They can always profitably lobby to block reform.

3 comments:

Joel Laramee said...

In other words, the state steals money from people as its main business, then cuts people in on the racket, who are powerful enough to protect the state's existence.

The state "likes" the free market, just like a fox "likes" seeing chickens growing up on a farm.

Nick said...

Protectionist laws are the epitome of stupid laws. Oh and if you like Chinese tires, they'll be getting a lot more expensive now as Obama is putting a tariff on those to help the US tire industry and specifically the United Steelworkers. lol ludicrous.

Robin Smith said...

This is EXACTLY correct.

Henry George discussed it, in "Protection or Free Trade" 120 years ago as being very very very stupid.

http://mises.org/books/freetrade.pdf

Your President is an economic menace. So is our Prime Minister. He told us there would be no more boom or bust about 5 years ago!

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