What the Whiskey Rebellion of 1791 Has to Teach Us About the Food Versus Fuel Issue

The famous Whiskey Rebellion occurred in 1791. Farmers were rebelling against a tax on their whiskey making — a tax they perceived as unfair and that harmed their businesses.

Back then, farmers "out West" (western Pennsylvania) had solved a problem in an ingenious way, and they didn't want it taken away from them. The problem they had was surplus corn. What can a farmer do with surplus corn? They could try to ship it back east to sell it, but it's bulky and expensive to ship. And it can rot, it gets eaten by bugs and mice, etc. Their solution was to turn it into whiskey (ethanol). So most farmers had a still. They transformed their excess corn into whiskey, which was valuable and condensed (easy to ship). It didn't go bad. Mice couldn't destroy it.

They turned their surplus corn into something wanted and valuable.

Flash forward to the 20th century. American farmers were continually suffering from massive surpluses which flooded the world market with cheap grain. There was so much surplus, grain prices around the world dropped out the bottom. Many farmers went bankrupt. They were so successful at increasing their crop yields that they were putting themselves out of business!

So what did they do? They tried to find other markets for their excess grain. One of the things they came up with was high-fructose corn syrup.

And another market they found was fuel. They began doing what their predecessors were doing back in the Whiskey Rebellion days — they turned their excess grain into ethanol.

But (music changes to a sinister tone) their success began to eat into the gasoline market. Because ethanol burns cleaner and has a higher octane rating, many states mandated its use as a small percentage of all gasoline sold. And as ethanol became better known, people wanted to use it more and more. So the oil industry went on a propaganda rampage against ethanol. And when food prices rose sharply in 2008, they exploited that fact by implicating the ethanol industry in raising food prices.

In fact, ethanol had almost no influence on the steep rise of food prices. In an ironic twist, the biggest culprit was oil prices! Turns out, the price of a barrel of oil has a large influence on the price of food because fertilizers and pesticides are petroleum products, farm equipment runs on petroleum, packaging often relies on petroleum (plastic is made from petroleum), and shipping the food relies on petroleum.

But the oil industry has been on a campaign to convince people ethanol production raises food prices. Another irony is that the ethanol industry was created because food prices were too low!

Pundits were crying out a warning that because of ethanol, food would get too expensive. People in poor countries would starve because of our greedy need for fuel, etc. But this is so far from the mark, it would be laughable if so many people hadn't fallen for it.

For someone who doesn't know anything about how it all works, it makes sense that higher food prices would lead to hunger. But in fact, in many ways, just the opposite is true. Most of the criticism about food-versus-fuel is centered on corn, so let's look at that.

Most of the corn America exports isn't purchased by poor countries. They don't have the money to buy it, no matter how cheap it is. Japan often purchases more U.S. corn than any other country. And when U.S. grain is cheap enough that poorer countries can buy it, the grain is so cheap, it puts local farmers from the poorer country out of business. This isn't good for local economies and can worsen their poverty.

This is a bigger deal than we might think. The vast majority of people in developing nations don't live in cities. They live in the countryside, and most of them are small farmers. Agricultural products are a large part of their country's economy. So when grain prices drop too low, rather than helping poor people, it can and does make them even poorer. Alexandra Spieldoch of the Institute for Agriculture and Trade Policy said, "Research shows that domestic food productivity is more effective in stabilizing developing-country food security than the reliance on inexpensive food imports. A fair price for the farmer's production will also help stabilize demand for wage labor in the local economy."

Jeffrey and Adrian Goettemoeller, experts in environmental remediation and sustainable agriculture, said, "Keeping grain prices quite low might seem like a good way to fight poverty, but the opposite result can come about when economies based largely on agriculture are damaged. Ironically, then, a reduction in U.S. exports resulting from increased corn ethanol production might help alleviate poverty-driven hunger in some places when coupled with efforts to enhance food production within developing countries."

Many people fear that fuel competition will cause food shortage or raise food prices. This fear was deliberately cultivated by the oil industry because it rightly sees ethanol as a competitor. But not only is ethanol from corn unlikely to raise food prices, but even if it does, it may very well be good news for developing countries.

Beyond that, fuel competition is not ethanol-specific. Cars could be capable of burning methanol too, and methanol can be made from renewable resources like forest thinnings and agricultural waste as well as natural gas and coal. It can even be made directly from CO2 captured from power plant and factory emissions.

And fuel competition is not limited to even these. Anything goes except cars that can burn nothing but gasoline. It will give us a wide choice of alternatives, which can then compete with each other for our transportation dollars, lowering the price for consumers and boosting the American economy.

Let's make it happen. The best place to start is an open fuel standard.

Adam Khan is the co-author with Klassy Evans of Fill Your Tank With Freedom and the author of Slotralogy and Self-Reliance, Translated. Follow his podcast, The Adam BombYou can email him here.

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