Are the Ethanol Rules and Subsidies Good or Bad for American Agriculture?

Newt Gingrich has defended the ethanol rules and subsidies as good for American agriculture, as providing prosperity for American farmers that would otherwise be obtainable. ("Professor Cornpone", Wall Street Journal, January 31, 2011.) This claim is debatable in the specifics and certainly false in the broad view. The ethanol subsidies benefit a specific class of farmers: large commodity farmers. But the subsidies have the effect of driving up corn prices and thereby harming other farmers who depend upon feed corn for livestock. When we look at American agriculture and the economic well-being of rural America generally, the evidence is that ethanol is harmful. Why?

• Ethanol has driving up the profit and price of commodity corn, which raises the prices of farm land; thereby making it more difficult for would-be farmers to enter farming
• Ethanol, by raising the cost of feed and land, harms the small farmer, by raising the cost basis of production, while small farmers are less able to pass along the costs to the consumer
• By weakening the economic prospects of small farmers, ethanol weakens the local and organic food movements
• Ethanol rewards economies of scale, mechanization, and genetically modified seed; thereby driving corn production to larger farms and farmers, which concentrates farm income in a small percentage of farmers
• Through land concentration and concentration of production in a small percentage of farms, ethanol depopulates rural areas, thereby undermining the economic basis of small rural towns and the services (e.g., schools, markets) they provide. Small farms are the necesssary basis for a sufficient rural population. Many large commodity farmers do not even reside year-round on their farms. Without small farms, rural society and the rural economy collapse. The evidence of this collapse is obvious to anyone who gets off the Interstate highways and travels on by-ways through America's farmland and rural areas.
• Ethanol distorts and corrupts the political process in agriculture and rural areas by creating and maintaining a powerful lobby with ties to the federal government--in effect, a fascist agricultural polity--that prevents the concerns of other farmers from finding relief in political representation.
• Ethanol weakens the local and organic food movements by elevating the place of corn in the American diet. All that corn ain't good for ya.

Ethanol is another government program, made in the name of a statist ideology intent upon substituting industrial policy for the free market, that rewards a small class of producers at the cost of the health all the other producers and economic well-being of society in general, in this case, rewards large commodity farmers at the expense of American agriculture and rural America.

I have written extensively on related aspects of these issues at my agricultural blog:

A Theory of Rural Life and Local Food