By Kenneth Rogoff, Project Syndicate, from CNN website, February 1, 2012
Editor's Note: Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF. For more from Rogoff, visit Project Syndicate or follow it on Facebook and Twitter. The views expressed in this article are solely those of Kenneth Rogoff.
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.
The views expressed in this article are solely those of Kenneth Rogoff.
First, let's get the lobbyists and the corporate financing out of Capitol Hill, and every other legislature, including all political campaigns.
Let's give the FDA both courageous and independent leadership and a fire wall separating its funding from the corporate interests.
Let's set up an independent body to receive and dispense research dollars to universities, independently from the corporate donors, so that those doing the research are not aware of the name of the corporate sponsor of their specific research, nor of the political (financial) implications of their findings.
Let's separate all politicians from using their "information" to speculate, trade or inform others as to the potential value of that information on specific stocks, bonds, funds etc. through legislation.
Let's transform the health care system to include compensation for doctors based on the "health" of their patients, not on the frequency of office visits with sick people who have no incentive to take repsonsibilty for their own health.
Let's ban tobacco products from all pharmacies and health care suppliers.
Let's get serious about the curricula that are permitted, encouraged and offered in elementary and secondary schools, as well as colleges and universities through incentivizing intramural activities and the elimination of intercollegiate athletics, both to reduce costs and to enhance the levels of participation among students at all levels.
Let's require full and complete disclosure of the chemical, and caloric, fat and salt contents of all processed foods, and incentivize the growth and marketing of non-processed foods for all tastes, and all budgets, and including formal education in the relative merits of the natural foods in all secondary schools. We also need to remove all sales of soda beverages from all educational institutions, as well as all "sugar" snacks, replacing them with sugar-free beverages and fruit, vegetable and nut snacks.
Let's incentivize corporations to develop healthy worker campaigns, including both formal and informal competitions, with funds raised going to such charities as Heart and Stroke Foundation, Canadian Cancer Society, the Lung Foundation...from such competitions. And let's start with the hospitals, around whose exits, around the clock, we can find clusters of hospital workers generating a cloud of toxic smoke from their lethal cigarettes.
If we are really going to get serious about the incestuous relationships that currently infest our capitalistic systems,
especially those that directly and indirectly "feed" public systems that are naturally suffering organizational COPD because of our participation in unhealthy lifestyles.
We are all addicted to unhealthy foods, habits, relationships and the blame game....pushing responsibilty onto others, while ignoring our own capacity to make better choices.
Incidentally, this piece is not funded by any corporation or non-profit foundation.