The senator from ethanol-land
Barack Obama has been talking tough about taxing Big Oil, but asnotes, there's a reason he won't criticize companies that are reaping record profits off of the current ethanol boondoggle.
THE RECENT news that ExxonMobil's second-quarter profits rang up at $11.7 billion--the largest quarterly profit of any company in history--rightly enraged millions of working people in the U.S. and abroad who are feeling the sting of high gas prices.
Democratic contender Barack Obama, among others, has been critical of such mega-profits. As a recent Obama campaign ad warns, "Every time you fill your tank, the oil companies fill their pockets." In response, Obama promises to stand up for workers' rights by instituting a windfall profits tax on oil companies if he becomes president.
But there's another industry that is currently reaping record profits that Obama most likely won't criticize: agribusiness companies that are currently raking in millions on the push towards ethanol and other biofuels.
In the U.S., corn-derived ethanol has been promoted as an "environmentally friendly" alternative to traditional fossil fuels. Thanks in part to massive government subsidies, millions of acres of land has been diverted from crops like soybeans to corn, and dozens of ethanol distilleries have popped up around the country, particularly in the Midwest.
Ethanol is not the savior it's made out to be, however. Some scientific studies--including one by Nobel Prize-winning chemist Paul Crutzen--show that ethanol derived from corn is potentially more polluting than fossil fuels. In addition, the diversion of cropland and corn to ethanol has helped drive up the prices of staple foods like tortillas, meat, milk and eggs in the U.S. and around the world.
But while the world's poor are feeling the pinch, agribusiness is making record profits off the biofuel push. Companies like Archer Daniels Midland (ADM), Cargill and ConAgra--whose environmental records were notoriously shoddy to begin with--have seen not only more money in their pockets as a result of biofuels, but an opportunity to remake their images as problem-solving "green" companies poised to head off future environmental catastrophe through corporate solutions.
In April, ADM announced that its quarterly profits had risen 42 percent, largely thanks to biofuels. Unsurprisingly, ADM CEO Pat Woertz told investors, "Biofuels are a real solution to a real problem. To retreat from biofuels is wrong." Wrong from the standpoint of profits, perhaps.
But as environmentalist Tom Philpott noted last year in an article on the environmental Web site Grist, ADM's real record has little to do with solving the "real problems" of the world's poor.
As Philpott pointed out, ADM--whose slogan is "Resourceful by Nature"--is "resourceful" at manipulating markets in order to turn a profit, even if it means misery for millions. According to Philpott:
Archer Daniels Midland, the leading U.S. ethanol maker and the world's biggest grain buyer, owns a 27 percent stake in Gruma, Mexico's dominant tortilla maker. ADM also owns a 40 percent share in a joint venture with Gruma to mill and refine wheat--meaning that when Mexican consumers are forced by high tortilla prices to switch to white bread, Gruma and ADM still win.
A family of four [in Mexico] eating a traditional diet consumes a kilogram--2.2 pounds--of tortillas per day. A year ago, a kilo of tortillas in some areas of Mexico cost about 63 cents. By January , the prices in the same places had soared to between $1.36 to $1.81 per kilo--a big chunk of the nation's $4.60 per day minimum wage. In short, low-income people found themselves priced out of the tortilla market, and forced into less-nutritious alternatives like white bread and ramen noodles.
As Philpott documents, even before the current spike in corn prices, Gruma/ADM changed its production process to produce lower-quality and less-nutritious tortillas, and raised its prices (even when corn prices were falling). The Mexican government was eventually forced by protests to step in to investigate charges of price gouging by Gruma/ADM and its rival, U.S. agribusiness giant Cargill.
So what does this mean for Americans? It means that our largest agribusiness company...has leveraged massive government support into a surging market in corn-based ethanol that serves few real environmental or social interests--and now it's manipulating the conditions caused by the ethanol boom to squeeze profits out of Mexico...
Yet rather than investigate ADM's habitual use of political influence to manipulate markets, the Bush administration continues to openly act as an ally. Bush recently upped the ante on government support for ethanol. And the USDA trumpets its collaboration with ADM on making federal farm policy, recently awarding CEO Patricia Woertz a spot on its prominent annual Agricultural Outlook Forum panel where she'll share the floor with USDA director Mike Johanns, along with Cargill's CEO and even the president of the American Petroleum Institute.
BUT IT'S not only the Bush administration who has championed biofuels and companies like ADM. Barack Obama has made sure to put biofuels at the front and center of his economic proposals, and has a history of backing laws favorable to agribusiness.
As the Washington Post noted:
Since entering the Senate in 2005, Obama has been a staunch supporter of ethanol--he justified his vote for the Bush Administration's 2005 energy bill, which was favorable to the oil industry, on the grounds that it also contained subsidies for ethanol and other forms of alternative energy, and he has sought earmarks for research projects on ethanol and other biofuels in his home state of Illinois, the second-highest corn-producing state after Iowa. Obama's support for ethanol is shared by many farm state senators (even Hillary Clinton came around after an ethanol industry took root in upstate New York).
In just this election cycle alone, according to the Center for Responsive Politics, the agribusiness industry has given $2.7 million to Democrats--with more than $1 million going to Obama's campaign.
The New York Times noted that Obama has appeared several times on the campaign trail with former Senate Majority Leader Tom Daschle, who currently sits on the boards of three ethanol companies and works at a Washington law firm where, according to his online job description, "he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy."
According to Obama economic policy director Jason Furman, Obama's commitment to biofuels is based primarily on "what's best for the country." But asked about his support for ethanol while on the campaign trail in April, Obama was more candid: "Look," he said. "I've been a strong ethanol supporter because Illinois...is a major corn producer." In other words, supporting the ethanol industry is just simple political logic. Unsurprisingly, ADM, the nation's largest ethanol producer, is also based in Illinois.
Obama has given especially strong support to E85, a fuel comprised of 85 percent ethanol. As journalist Ken Silverstein noted in a 2006 article in Harpers, where he detailed Obama's support for ethanol at July 2006 speech for the group Campus Progress, E85 is "a product whose profits accrue to a small group of corporate corn growers led by Illinois-headquartered Archer Daniels Midland."
Silverstein went on to note that, in his speech,
Obama had essentially marshaled his 20 minutes of undeniably moving oratory to plump for the classic pork-barrel cause of every Midwestern politician...It is not, of course, family farmers who primarily benefit from the [ethanol subsidies] program but rather the agribusiness giants such as Illinois-based Aventine Renewable Energy and Archer Daniels Midland (for which ethanol accounts for just 5 percent of its sales but an estimated 23 percent of its profits).
During his first year in office, Silverstein noted, Obama traveled on ADM's private jets at least twice, and introduced a number of measures that benefited the agribusiness industry--such as the "Obama Amendment" that offered oil companies a 50 percent tax credit for building gas stations that offer E85 fuel. Obama also voted for the Bush administration's 2005 energy bill and opposed a proposal to lower tariffs on cheaper sugarcane-based ethanol from Brazil and other countries.
As Silverstein noted, "On condition of anonymity, one Washington lobbyist I spoke with was willing to point out the obvious: that big donors would not be helping out Obama if they didn't see him as a 'player.'
"The lobbyist added: 'What's the dollar value of a starry-eyed idealist?'"