larger | smaller
comments: 0
FRANKFURT "“ A systematic and broad failure of regulation is the elephant in the room when it comes to reforming today's Western capitalism. Yes, much has been said about the unhealthy political-regulatory-financial dynamic that led to the global economy's heart attack in 2008 (initiating what Carmen Reinhart and I call "The Second Great Contraction"). But is the problem unique to the financial industry, or does it exemplify a deeper flaw in Western capitalism?
Consider the food industry, particularly its sometimes-malign influence on nutrition and health. Obesity rates are soaring around the entire world, though, among large countries, the problem is perhaps most severe in the United States. According the US Centers for Disease Control and Prevention, roughly one-third of US adults are obese (indicated by a body mass index above 30). Even more shockingly, more than one in six children and adolescents are obese, a rate that has tripled since 1980. (Full disclosure: my spouse produces a television and Web show, called kickinkitchen.tv, aimed at combating childhood obesity.)
Of course, the problems of the food industry have been vigorously highlighted by experts on nutrition and health, including Michael Pollan and David Katz, and certainly by many economists as well. And there are numerous other examples, across a wide variety of goods and services, where one could find similar issues. Here, though, I want to focus on the food industry's link to broader problems with contemporary capitalism (which has certainly facilitated the worldwide obesity explosion), and on why the US political system has devoted remarkably little attention to the issue (though First Lady Michelle Obama has made important efforts to raise awareness).
Obesity affects life expectancy in numerous ways, ranging from cardiovascular disease to some types of cancer. Moreover, obesity "“ certainly in its morbid manifestations "“ can affect quality of life. The costs are borne not only by the individual, but also by society "“ directly, through the health-care system, and indirectly, through lost productivity, for example, and higher transport costs (more jet fuel, larger seats, etc.).
But the obesity epidemic hardly looks like a growth killer. Highly processed corn-based food products, with lots of chemical additives, are well known to be a major driver of weight gain, but, from a conventional growth-accounting perspective, they are great stuff. Big agriculture gets paid for growing the corn (often subsidized by the government), and the food processors get paid for adding tons of chemicals to create a habit-forming "“ and thus irresistible "“ product. Along the way, scientists get paid for finding just the right mix of salt, sugar, and chemicals to make the latest instant food maximally addictive; advertisers get paid for peddling it; and, in the end, the health-care industry makes a fortune treating the disease that inevitably results.
Coronary capitalism is fantastic for the stock market, which includes companies in all of these industries. Highly processed food is also good for jobs, including high-end employment in research, advertising, and health care.
So, who could complain? Certainly not politicians, who get re-elected when jobs are plentiful and stock prices are up "“ and get donations from all of the industries that participate in the production of processed food. Indeed, in the US, politicians who dared to talk about the health, environmental, or sustainability implications of processed food would in many cases find themselves starved of campaign funds.
True, market forces have spurred innovation, which has continually driven down the price of processed food, even as the price of plain old fruits and vegetables has gone up. That is a fair point, but it overlooks the huge market failure here.
Consumers are provided with precious little information through schools, libraries, or health campaigns; instead, they are swamped with disinformation through advertising. Conditions for children are particularly alarming. With few resources for high-quality public television in most countries, children are co-opted by channels paid for by advertisements, including by food industry.
Beyond disinformation, producers have few incentives to internalize the costs of the environmental damage that they cause. Likewise, consumers have little incentive to internalize the health-care costs of their food choices.
If our only problems were the food industry causing physical heart attacks and the financial industry facilitating their economic equivalent, that would be bad enough. But the pathological regulatory-political-economic dynamic that characterizes these industries is far broader. We need to develop new and much better institutions to protect society's long-run interests.
Of course, the balance between consumer sovereignty and paternalism is always delicate. But we could certainly begin to strike a healthier balance than the one we have by giving the public far better information across a range of platforms, so that people could begin to make more informed consumption choices and political decisions.
Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.
Copyright: Project Syndicate, 2012. www.project-syndicate.orgFor a podcast of this commentary in English, please use this link:http://traffic.libsyn.com/projectsyndicate/rogoff89.mp3
You might also like to read more from Kenneth Rogoff or return to our home page.
Share Tweet
Reprinting material from this website without written consent from Project Syndicate is a violation of international copyright law. To secure permission, please contact distribution@project-syndicate.org. var OB_langJS = 'http://widgets.outbrain.com/lang_en.js'; var OBITm = '1292502431965';var OB_raterMode = 'none';var OB_recMode = 'rec'; var OutbrainPermaLink='http://www.project-syndicate.org/commentary/rogoff89/English'; if ( typeof(OB_Script)!='undefined' )OutbrainStart(); else { var OB_Script = true; var str = unescape("%3Cscript src='http://widgets.outbrain.com/OutbrainRater.js' type='text/javascript'%3E%3C/script%3E"); document.write(str); } print recommend Send link clip secure rights COMMENTSYou must be logged in to post or reply to a comment. Please log in or sign up for a free account.
COMMENTSYou must be logged in to post or reply to a comment. Please log in or sign up for a free account.
Username Password New registration Forgotten password AUTHOR INFO Kenneth Rogoff Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF. MOST READ MOST RECOMMENDED MOST COMMENTED The Perils of 2012 Joseph E. Stiglitz Rethinking the Growth Imperative Kenneth Rogoff The Straits of America Nouriel Roubini How to Create a Depression Martin Feldstein Does Austerity Promote Economic Growth? Robert J. Shiller A New World Architecture George Soros America's Political Class Struggle Jeffrey D. Sachs Did the Poor Cause the Crisis? Simon Johnson The Risky Rich Nouriel Roubini The Second Great Contraction Kenneth Rogoff The Perils of 2012 Joseph E. Stiglitz Does Debt Matter? Robert Skidelsky Africa's Stolen History Juliet Torome Does Austerity Promote Economic Growth? Robert J. Shiller How to Create a Depression Martin Feldstein ADVERTISEMENT PROJECT SYNDICATEProject Syndicate: the world's pre-eminent source of original op-ed commentaries. A unique collaboration of distinguished opinion makers from every corner of the globe, Project Syndicate provides incisive perspectives on our changing world by those who are shaping its politics, economics, science, and culture. Exclusive, trenchant, unparalleled in scope and depth: Project Syndicate is truly A World of Ideas.
Project Syndicate provides the world's foremost newspapers with exclusive commentaries by prominent leaders and opinion makers. It currently offers 58 monthly series and one weekly series of columns on topics ranging from economics to international affairs to science and philosophy.
PROJECT SYNDICATE The Unbound Economy Kenneth Rogoff What will drive recovery from the financial crisis of 2008? Will China eventually suffer a Japanese-style hard landing after decades of rapid growth? ...read more Capitalism Then and Now Harold James Is globalization reversible? Do currencies rise and fall like empires? How does culture influence economic development and performance? ...read more Against the Current Robert Skidelsky Are markets moral? What does the East expect from the West? Has globalization killed the idea of equality? ...read more © Project Syndicate 1995 - 2012 How to become a member | Member papers | Support us | About us | Contact us _bizo_data_partner_id = 790 var OBCTm='1292510578203'; var _comscore = _comscore || []; _comscore.push({ c1: "2", c2: "8756795" }); (function() { var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; s.async = true; s.src = (document.location.protocol == "https:" ? "https://sb" : "http://b") + ".scorecardresearch.com/beacon.js"; el.parentNode.insertBefore(s, el); })(); _qoptions={ qacct:"p-f8E80KYHdFRZg" }; (function(w, c) { (w[c] = w[c] || []).push(function() { try { w.yaCounter6251587 = new Ya.Metrika({id:6251587, clickmap:true}); } catch(e) { } }); })(window, 'yandex_metrika_callbacks');You must be logged in to post or reply to a comment. Please log in or sign up for a free account.
You must be logged in to post or reply to a comment. Please log in or sign up for a free account.
Project Syndicate: the world's pre-eminent source of original op-ed commentaries. A unique collaboration of distinguished opinion makers from every corner of the globe, Project Syndicate provides incisive perspectives on our changing world by those who are shaping its politics, economics, science, and culture. Exclusive, trenchant, unparalleled in scope and depth: Project Syndicate is truly A World of Ideas.
Project Syndicate provides the world's foremost newspapers with exclusive commentaries by prominent leaders and opinion makers. It currently offers 58 monthly series and one weekly series of columns on topics ranging from economics to international affairs to science and philosophy.
Read Full Article »