In today's Economy Lab, MLI's Linda Nazareth discusses the high cost that food prices have for the world's growing middle class.
Linda Nazareth, The Globe and Mail, Friday, Apr. 12 2013
Question one: If food prices go down, do people gain or lose weight?
Answer: Gain. Food is cheaper, so people can eat more.
Next question: If food prices go up, do people gain or lose weight?
Answer: Gain. Just because.
Well, okay, not "just because." According to the latest analysis by the World Bank, there are lots of reasons why people the world over have been gaining weight over the past decade or so, and lots of reasons to believe that the trend will continue – with a high price tag attached.
The World Bank's analysis indicates that undernourishment is still a bigger problem in the world than obesity – but only just. In fact, if current trends continue, there will soon be more people in the world battling their weight than people battling malnourishment.
Food prices should have something to do with this – lower food prices, all things being equal, should encourage more consumption – but the data do not even bear that out. In fact, obesity rates have grown throughout the world over the past couple of decades, during periods when food prices were rising and declining alike. The list of things that influence body weight span a wide scope, and include things such as modern lifestyles, advertising, and incomes.
In a global sense, it is that "incomes" factor that might be the key. According to the World Bank figures, the evidence is that Body Mass Index (BMI, a measure of weight to height) rises rapidly until poorer countries get to a per capita income of $5,000 (U.S.), then continues to rise until per capita income of $17,000 is reached. After that point, obesity rates go down.
Given that fact, obesity rates are going to head higher globally, not lower. Much of the world is rapidly developing a middle class.
That does not mean that they are headed for North American-style two-car-garage prosperity, but rather that there will be a mass of people who are not living in abject poverty. If history is correct, that suggests that they will use some of their newfound wealth buying food that was previously unavailable to them – and that they might have been better off leaving alone. Switching whole grains for processed food is not exactly a sign of progress, but it is apparently a sign of prosperity.
And once an economy reaches even a modest level of affluence, higher prices mean people eat worse, but not less. The cheaper food alternatives in times of high food inflation are typically less healthy, higher-fat, higher-calorie choices. (Think of junk food.)
North Americans, and those in developed countries as a whole, know all about making poor food choices, or simply about eating too much. To date, policy responses to address the problem have not been particularly effective. Japan fines employers whose employees exceed waistline limits, and the United States has tried everything from coaxing from the First Lady through to taxing Big Gulp drinks in New York. Clearly there is no simple fix to the problem.
But some kind of fix had better be found – and sooner rather than later. The world is barely paying the bills for the last round of fiscal stimulus, and the aging population means a slew of new social costs are ahead. The aging world population alone suggests that health care costs are going to skyrocket soon – and that's without adding a helping of weight-related illnesses.
Linda Nazareth is the principal of Relentless Economics Inc. and a senior fellow at the Macdonald Laurier Institute.
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