PSYC 123: The Psychology, Biology and Politics of Food

Lecture 15

 - Economics, Nutrition and Health: Subsidies, Food Deserts and More


Professor Brownell discusses how economic factors are a profound driver of food choices in both the U.S. and internationally. He reviews the history of food subsidies and how they have made the U.S. an agricultural force but simultaneously changed the current food environment and diet. Furthermore, Professor Brownell explores how economic incentives to purchase highly processed packaged, calorie dense, nutrient poor foods are increasing while incentives to purchase fresh fruits and vegetables are decreasing; and how this imbalance drives overconsumption globally. Professor Brownell also reviews how neighborhood factors and poverty affect access to foods and diet, the global food crisis, and discusses potential interventions to address how economics influence poor diet today.

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The Psychology, Biology and Politics of Food

PSYC 123 - Lecture 15 - Economics, Nutrition and Health: Subsidies, Food Deserts and More

Chapter 1. What Social Class Means in Terms of Health [00:00:00]

Professor Kelly Brownell: Okay, I’d like to start off by getting a show of hands on something. We’ll — I’ll mention later in the lecture today how much world food prices have gone up in the past year in particular, but the past two years in general. Food prices around the world have increased dramatically, and one could speculate about what impact this would have on health and nutrition around the world. What I’d like to ask is what would we expect these spiking food prices to do? Should we expect it to exacerbate malnutrition/undernutrition, to exacerbate overnutrition and obesity or do both? How many of you would say both? Okay, so good that’s the right answer by the way, so it’s nice that we’ve been able to convey that message in the class.

We’ll discuss during the class why that might be the case, because it’s counterintuitive at first glance, because you think that higher food prices means people could buy less food and hunger would be more affected, but actually both are going to be affected in interesting ways.

If we look around the world we get quite a different picture across countries of how much disposable income, or how much of income in general, people spend on food. This graph — each of these lines represents a country and how much of income it takes to eat. The numbers of the percentages are on the right, so the top bar represents a given country. That country people spend 16% of their income on food and the bottom country it’s 60%.

Now I’ll show you with the list of countries, how it varies from place to place around the world. Now these are really remarkable differences. We see that the food situation in countries like Finland, France, and New Zealand are really quite different than they are in places like Mexico, India, and Nigeria. Of course you see the difference between developed and developing countries here.

One can only imagine what kind of influence this has on the range of food choices people have available to them, and what impact this has on their overall diet. Now, it’s interesting to think about where the U.S. fits in the scheme of things. Here are the numbers for the U.S. Only 10%, so we lead the world in low food cost, and people require less of their income in this country to eat then they do anywhere in the world.

Now that’s good and that’s bad. It’s good of course because people who are poor and don’t have much money can get food inexpensively. It’s bad in a way because the foods that one can acquire inexpensively, as we’ve mentioned before in class, tend to be the highly processed, highly calorie dense, nutrient poor foods that contribute to malnutrition in some families and over nutrition in others. We’ll come back to why this is important later in the class.

Let’s talk about income and what it means in terms of health and then we’ll talk about diet nutrition specifically. If we look at this graph from 1900 and the projection to 2050 here, here is the expected life expectancy for females and males. What you can see overall, as you know, is greatly increased life expectancy. As we talked about in the class on public health, this comes about from a variety of things: sanitation, immunizations, basic public health measures as well as developments in medicine, but also food and nutrition play a big role in this. There was this one golden year, 1920, when men had the same life expectancy as women. I’m not sure exactly what was going on there but it was interesting, but all the other years, women have the advantage.

How is life expectancy affected by income and things like social class? Well it’s an effect; you can imagine that there’s a correlation here, that if one is poor your life expectancy isn’t as great as if you’re not poor, but the magnitude of the effect is really quite striking. People who study this discuss the term — use the term health disparities to describe this difference or they talk about an SES gradient, and SES stands for social economic status or social class, in other words.

One of the people who studied this most intensively is a woman named Nancy Adler who’s a scientist at The University of California San Francisco. The website that you see listed on the bottom has a lot of information on this particular issue if you’re interested in pursuing it.

Let’s look at some numbers. Here’s the relationship between household income and fair or poor health status. As you go along the X axis here, you have less then $15,000 up to $50,000 or more of household income; and then this is the perceived poor health — poor or fair health status on the Y axis. The data looked like this. The number of people with fair or poor health status, 20.6% in that — the group with the lowest income and only 3.7% in this group. That’s a really major difference. It’s not one or one, or two, or three or ten percentage points’ difference. It’s a major difference.

There’s something about being poor that affects people’s health, and it’s easy to guess about what some of those factors would be. You live in a poor environment, you’re more likely to be exposed to environmental toxins. Things like lead paint, jobs that expose you to toxic substances, and the like. You’re less likely to have education that would lead to better healthcare choices. You don’t have the money to go get good healthcare. The healthcare you have access too may not be as good. The list goes on and on and on, but this is really quite a striking finding.

We have to ask what role food nutrition plays in this association and can something be done about it? Here’s another example of rates of congestive heart failure by income, and in this case we have rates of heart failure here, and this is income, so you have more than $45,000 less than $25,000. For the people with the highest levels of income, at least in this particular graph, you see this number. Then in the second level you see this, you see that, and then you see that, so again, really pretty striking differences between the lowest and the highest level. If we look at rates of hypertension by income, we find pretty much the same association.

For disease after disease, after disease there’s an SES gradient. There is an impact of social class, income, and education and all those things put together on a person’s likelihood of getting the disease, dying early from a disease, have recurrence of disease, and the like, so it’s not good to be poor.

One study that looked at this was done by a group at Harvard led by a well known researcher named Christopher Murray. What they did was they took groups of people in the United States, and said they were eight Americas. And they broke the population into sort of middle class people and then seven other groups that have social disadvantage or have some geographic similarities, and talked about the likelihood of premature death in these individuals.

What they found, looking at life expectancy, is the difference between the highest and lowest group within these eight Americas was 13 years for females and 15 years for males. Just think about that, if you’re in the highest group and your life expectancy — and this is a little bit high, but let’s just say its 85 — then you have the 15 year difference. For the males that would be dying at 70, or if the average life expectancy is 70 then back off 15 years from that and you can see a major — think about 15 years of your life gets subtracted automatically if you’re poor and you’re male, 13 years if you’re female. Major impact.

The question related to diet, nutrition and health are: what are the economic drivers? What role does poverty play? What role do things like agriculture economics play in this, and then what can be done to try to correct the situation?

There are a lot of interesting proposals that have been made to try to address this and we’ll walk through some of them. Does the economic landscape help these things? These things related to diet and regulation of body weight, and they hurt if you’re in some social classes and they help if you’re in others. It really depends on where you are in the social ladder. You can be helped with your health or hurt.

Let’s talk about poverty, diet, and the cost of eating well and the raw cost of food and how poverty affects things related to food. One of the people who studied this most extensively is a researcher at The University of Washington named Adam Drewnowski. He’s done a lot of interesting economic research and I’ll show you some slides from work that he’s done.

First, he helped establish — as other people have done as well — the link of poverty with obesity. What this slide shows is on the left hand set of bars you have income (this is one way of measuring poverty, income of course) and this is likelihood of obesity. In this set of bars you have another common indicator of poverty which is level of education and here you have higher education, and here you have higher body mass index.

Without going through all the different bars, the basic slopes of the line look like this: so it shows that as you’re income goes down or your education goes down — which means you’re to the left of these sides of the graph — your likelihood of being overweight is greater. We’ve talked a little bit before about why that might be and we’ll talk more about that today.

Here’s another example from Manhattan. Drewnowski and colleagues did this clever thing where they looked at areas of Manhattan and coded two things. One was household income, and the other was prevalence of obesity. Over here are the income numbers and the darker the colors get the higher the income, so you have the very poor areas up here, you have the wealthy areas of Manhattan over here, and then obesity prevalence is expressed as the size of the dots.

You can see from this, a very clear relationship that the largest dots, the highest prevalence of obesity are in the poorer areas of Manhattan, and over here, the tiny dot is in the area with the highest income levels. So that suggests that same relationship that I said before. If you plot these things on a graph, rather than using dots and colors, it looks pretty much like this: that obesity prevalence is over on this axis and down here is per capita income. As income goes up, the likelihood of obesity goes down. As income is low likelihood of obesity has — is up.

That’s a pretty common phenomenon now, other people have shown that, and it’s a sad situation. The question is why? What might be going on here? If you look at the relationship, the correlations within these studies, between body weight and likelihood of having problems, the correlations are this. You have a .6 correlation. 1.0 means a perfect correlation, that there’s a one for one change between two variables, in this case, likelihood of obesity and income. The fact is, the Diabetes relationship is even stronger and this is a remarkable association for two variables like this; .87. It’s very high.

What this suggests, and most of the Diabetes is driven by the obesity by the way, so why would there be a stronger relationship between the Diabetes, the disease outcome, more so then the obesity itself? It’s because healthcare enters into this. It’s management of the Diabetes, it’s the opportunity to get help for it, to buy the needed supplies and the like. You can see that the relationship between diet and obesity is strong — income and obesity, but even stronger with the diseases that might come from it. This association is not true just in the United States.

These are data from the Netherlands where investigators created an index of what they called neighborhood deprivation, that was a combination of education, employment and income — education, occupation and employment — and then they looked to see how that was related to risk for obesity.

What you find is the same thing. As you go up the levels of deprivation from level one to level four, the likelihood of obesity goes up, in this very stepwise function. If you think back to the graphs that I showed you on hypertension, congestive heart failure, life expectancy, and now this, these are very orderly relationships. You don’t often see something like this in science, but these are just perfectly straight lines, if you will, and that tells us something about the power of the variable to affect what people are experiencing in their lives.

Chapter 2. The Cost of Calories [00:13:30]

One of the reasons — now this is a complicated graph but it’ll become less complicated as I try to explain parts of it — one of the reasons that poor diet and obesity are related to low income, is what different foods cost. This graph shows a variety of foods, where on the bottom line you see how much things cost. Now the units, don’t worry about the units here, because this is the log of cents per ten megajoules of energy, so forget all that, not many people would understand that. It’s even hard for me to get all that. Basically, as you go from left to right, it means foods cost more. Over here is the energy density, so this is how many calories something has per unit weight, per ounce, per gram or whatever. If we block out certain parts of this we get the whole picture.

If you look at the foods in the upper left hand corner, these are the foods that are most energy dense. They have the most calories per unit weight. They’re the lowest in cost. The foods that have the most nutrients but low calorie levels, the ones that you’d like to see the population eating more, are highest in cost.

This relationship is true not only in the U.S., but here are data from France. If you do the same sort of blocking function, you see exactly the same relationship. In France, the foods that are highest in energy density, things that the population should eat less of except the grains perhaps, you have higher cost, and then for the foods that you’d like to see eating more of you have higher costs for these, lower cost for those.

If you knew nothing about the United States or France other than this; and knowing that economics are a powerful driver of human behavior, what would you predict other then an epidemic of bad diet? It’s hard to imagine overcoming things unless this situation gets corrected.

Now, some of this is built into the foods and we’ll talk about this a little bit more in a moment. If you look at the foods on the right, all those things can spoil. You have to go harvest them, shipping them long distances becomes a problem and expensive issue because of refrigeration. Over here, you’re making things that last a very long time, are highly processed, have long shelf lives, won’t spoil so much, and therefore, can bring down the costs a good bit, so some of this has to do with the realities of the food.

What will probably always be the case, no matter what happens with government policy, that eating a carrot, buying a carrot, an apple, or something like that — unless you live right by where it happens to be grown — is going to be a more expensive proposition then eating a Twinkie, a bag of Cheetos, or something in a bottle like Coca-Cola, because those things are processed, have long shelf lives, etc., the others don’t; so that’s part of the picture. However, government policy becomes part of the picture as well, and when governments get in the way of good nutrition then we have cause for concern, and we have to wonder what might be done.

The relative changes in costs are interesting. If you look at numbers from 1980 to 2000 using the Consumer Price Index, during that period of time — now of course with the current economy everything’s gone haywire — so we’ll talk about the period before that. The 3.8% average increase in the inflation rate during that period of time, but food prices rose less then the average inflation rate, which means that during that period of time it became relatively easier in the United States to buy food. Again, that’s good if you’re poor.

But it’s not happened evenly across all parts of the food supply. During that period of time there was a big increase in calories in men, and even bigger increase in calories in women — and it’s interesting to speculate about why that might be. Much of the increase comes from carbohydrates, 40% rise in juices and fruit drinks — that’s giving way to other sugared beverages that people are drinking now like the energy drinks, sports drinks, and things like that — and then you can see a major rise in soft drink intake. There’s also, during that period of time, a documented increase in snacking that’s quite large. So here are where the calories are coming from during that period of time.

What’s happened to the food prices within these various categories? Well here is some data on that. If you look from 1985 to 2000, here’s how much soft drinks went up in cost and here’s how much sugars and sweets went up, and here’s how much fruits and vegetables went up.

Soft drinks went up 20% during that period of time, not much given that that’s a 15-year period and everything is going up in price. Sugars and sweets rose by this much where fruits and vegetables went up like this.

So that means during that 15-year period of time food became a little less expensive to buy. But the proportion of calories that one could get from different foods varies according to cost, and so it became easier to buy soft drinks during that period time relative to the fruits and vegetables, which became more expensive to buy.

Now of course this is the exact reverse of what you’d like to see from a public health point of view. What’s happened here? Why in the world would that be the case in a country that has more agriculture abundance then anywhere in the world? Well it’s interesting, because this is happening elsewhere around the world as well. Here’s an example of that. These numbers are from England. What they did was they created a shopping basket of sample foods that a family might buy in a supermarket or a market, and they created a shopping cart of healthy food and a shopping cart of unhealthy food and they wanted to see how the two would compare in price.

They did this in 1988 and they found that the healthy food cart cost 18% more than the unhealthy food cart. And then they went back in 1995, got all the same foods together again and looked to see what the comparison would be, and it was 51% more. So similar to the numbers that I showed on that previous graph, it looks like something is happening out there in the world that’s making unhealthy food more appealing to people, more a part of their diet, than unhealthy foods. There are many — more unhealthy foods then healthy foods — so there are many, many opportunities here to describe why that might be.

All kinds of speculation about this — marketing, the processing of more foods, heavy promotion of these foods to children, there are a lot of things going on, but economics are a player too and that’s what we’re talking about today.

Chapter 3. Race, Class and Access: Food Deserts [00:20:35]

One way to look at this is something that people have called food deserts. This is a very interesting concept. The term is out there a little bit now in the popular press so you may have heard the term, but it’s a very interesting concept.

The idea behind food deserts, and the first definition of this came from a group in England is this: that it’s areas of relative exclusion where people experience physical and economic barriers to accessing healthy foods. The idea there is depending on where you live, your access to food might vary a lot compared to people that might live in other areas. Where you live becomes a pretty important determinant of what foods you have to buy.

Before we talked about the cost of foods being a driver, and that’s certainly the case. Mow let’s talk about access and that’s what this is all about. Food deserts exist where people don’t have auto — may not have automobiles or don’t have a lot of money, and therefore have to rely on local markets. The local markets tend to carry foods that are processed. They tend to have few fruits and vegetables, and when they do they’re poor quality, and the price is high.

We just published a study ourselves at The Rudd Center led by — The Rudd Center Economist, Tanya Andreeva, looking at food issues in New Haven. We found pretty much the case that is mentioned here, that in New Haven today — and this has been true over the years — access to healthy food is harder if you’re in a poor neighborhood.

Here’s some data from England that’s just the same thing. It looked at the percent of the population who lived within 500 — now this is a poor area — within 500 meters fruits and vegetables or junk foods. Only 20% of the people lived within 500 meters of fruits and vegetables, and 90% of people lived within 500 meters of junk food. So the price drives people and access drives people. Then there are a variety of variables like marketing, that we’ll talk about on Wednesday.

Some people have talked about correcting this, but it’s a slow process and it’s not happening nearly as fast as it might. Here’s an article from The New York Times talking about Harlem still waiting for a supermarket it needs. This area of Harlem is a food desert. It’s an area of relative exclusion, where people who live there have access to lots of junk foods, lots of processed foods, few fruits and vegetables, and high prices for the most part.

Other studies have shown that for the same food, people will pay more, believe it or not, in poor neighborhoods than they will in suburban markets. There are reasons for that that I’ll show you in just a moment. These factors converge to form this powerful set of drivers that make it very difficult for people to eat a healthy diet.

Here’s another example in Los Angeles. There was a group in Los Angeles that studied the number of supermarkets in inner city Los Angeles, and they looked at the number of full service supermarkets and chain stores in the inner city Los Angeles and the data looked like this: 1963, 1991 and 2002. The picture doesn’t appear to be coming better, it appears to be becoming worse. And this of course leads to lots of problems.

This particular report also looked at the supermarkets per thousand households in LA, according to the percent of households in that area that are below the poverty line. Over here, when you have 40% or more percent of households below the poverty line, this is the density of supermarkets in their neighborhood. The density is much higher as there’s less poverty. Again, data point, after data point, after data point suggests this to be the case.

What are some of the economic realities? Why would food cost more, and why would it be less accessible in poor neighborhoods? Well again, you could probably concoct this list from common sense, but there’s some of these things that people don’t often think about.

First, small stores can’t buy in bulk, so they don’t really have much buying power that a major chain would. The wholesalers are reluctant to deliver small amounts of food. So if there is a niche food that would — could be acceptable in a big supermarket, because there are other things that are selling in higher amounts, that’s not the case here. So they have to sell what people are buying more of. The markets can’t afford the spoilage, some don’t have refrigeration equipment to counteract the spoilage. They tend to stock the hard vegetables when they have them at all — the vegetables that may not be the highest in nutrients but the ones that can last a long time without spoiling.

In some cases, the ethnic mix makes stocking difficult, because you have so many different groups in some of the poor areas. Some of the ethnic foods need to be imported because — and that’s why they’re so expensive. The shopkeeper cannot pass along the cost easily to the consumers, because the consumers don’t have much buying power; and then there are few incentives for the larger stores to open.

One question is, what happens when large, full service supermarkets do open in inner cities? We have some data on that that I’ll show you in a little — in a moment. This question becomes interesting. Why aren’t there big supermarkets in poor neighborhoods? Why are there the foods there are in the small stores that are in the poor neighborhoods? Is this — is the food — are the eating habits being driven by the supply of food, or are the shopkeepers merely responding to demand? If they sell few tomatoes and — or a little broccoli or asparagus let’s say, and they sell a lot of bags of packaged chips, is it just because people want them?

Well, that’s not been addressed totally, but at least one study from some researchers at the University of North Carolina, did look at this. What they did was they looked at the presence of at least one supermarket in white neighborhoods and black neighborhoods. They found that the number of people who limit their fat intake is higher in these black neighborhoods if there is a full service supermarket in the neighborhood. These people in the white neighborhoods, they’re more likely to have access to these kind of foods anyway; but when a supermarket goes into a black neighborhood, the number of people who start limiting the fat in the diet goes up. That’s a pretty significant difference there, so that suggests that there is some cause and effect: that if you change the food supply, you get changes in diet.

Now this is one study, more needs to be done for sure, but it’s pretty darn interesting. This would suggest that there is some public policy things that could be readily done to try to encourage full service supermarkets to open in inner cities in the United States. For example, tax incentives for companies, zoning law changes, enterprise zones, things that city governments can do to help encourage this maneuver, so that the full service supermarkets open in inner cities.

That accomplishes two things. One is the prices go down because the large supermarkets can buy in bulk and they have all the equipment. And of course, choice goes up, and the number — the proportion of healthy food choices gets higher.

Now, this may not be true outside the U.S. by the way. There is some concern in the developing world where large supermarket chains open up, bring in a lot of imported packaged and processed foods that people aren’t used too and the local diet gets eroded. People begin eating non-local, non-traditional foods, and their risk for disease goes up. This presence of large supermarkets may help in certain parts of the world and hurt in others, so it’s interesting to think about that.

Chapter 4. Government’s Role in Shaping Access and Prices [00:28:53]

What’s government’s role in this? What role does government play in shaping access to food and food prices, and is government doing a good job with this or is government getting in the way of public health?

First we’ll talk about agriculture and food economics. This — the old food guide pyramid that most of you guys probably grew up with — it’s been revised now and there’s a new pyramid that I talked about in an earlier class. Here is some data from the old pyramid, then we’ll look at the new government policies to see whether they have become any better. If you look at the food guide pyramid that existed before the present one, there was a slice of the pyramid that was meat, poultry, fish and eggs. The U.S. Department of Agriculture suggested that those foods together comprised 14% of our diet. So you put all those foods together and we should be eating 14% of our calories from them.

If you looked at where the subsidies were going, and where the support from the U.S. Department of Agriculture was going, those industries were getting 52% of USDA funding. Fruits and vegetables, the USDA said, was to — were to comprise 33% of our total calories according to the pyramid. But those industries got 5% of the funding.

Now, this shows this fundamental problem with the U.S. Department of Agriculture because — and I’ll talk about this in a later class in a little more detail. The USDA has two purposes: one is to establish nutrition policy for the country; the other is to help promote agriculture and help the agriculture industry sell as much food as possible.

One can see where these two interests compete with one another. When they do, when there’s a conflict of interest here, one almost always wins out over the other, and you can see from this slide what happens. The need to sell more food, the political power, the organized nature of certain parts of the food industry, determine where the funds go much, much more so than public health or nutrition priorities. You can see it from this list.

These numbers are say ten years old, what about today? Let’s talk about federal food subsidies today, and where they go. Here’s how the pie is set up. If you look at 74% of the subsidies, they go to meat and dairy. Just the same as what happened ten years ago, even though we have ten more years of data, we have an obesity problem that’s out of control, we have poor diet nutrition savaging the country and eroding the healthcare system because of the high cost, record rates of Diabetes, and yet the policies stay the same. Grains are 13% of the subsidies; sugar, oil, starch and alcohol 11%; nuts and legumes 1.9%; .4% fruits and vegetables.

Something is dreadfully wrong in this picture but these policies continue. Why? Why in the world would this be? Well there’s a history to it that I’ll tell you in a moment, but more important, is the powerful political force that the food industry forms. As I’ll mention, the agriculture of the farmers have come together in some cases with the large food companies to form a very powerful political voice; some parts of that industry are organized, and others aren’t. Among the best organized of all the agriculture players, are the meat and the dairy people.

Among the least organized are the fruit and vegetable people. I may have described this before, but one of the problems is that the fruit and vegetable people are made up of a lot of small, specific interests that don’t necessarily collaborate with each other. For example, there’s a plum association, a pear association, an avocado association, there’s a raisin association. It goes on and on and on with all these little interest groups and it’s very splintered. There’s been some attempt, but it’s not been very weak or well funded by the industry, to say that let’s combine forces and as we promote fruits and vegetables, we all rise with the tide. More they’re competing with one another, whereas the meat and the dairy people are extremely well organized. So this is a problem.

The history of this interesting, but it shows up in a lot of ways. The National Cancer Institute, the NCI, supports the five a day program. You all know — you’ve heard about five-a-day, you’re supposed to eat five servings a day of fruits and vegetables. At its peak, that program was given $3 million dollars for promotion. That same year that this happened, McDonald’s on the, we love to see you smile campaign, spent $500 million dollars. You can’t do anything with $3 million dollars, you just can’t. You can have a program, the USDA can say we promote good nutrition, we have the five-a-day program, we have a food guide pyramid, and then we spend nothing on it. It essentially has no teeth. So you can look good in one arena while you’re really doing the conflict of interest behavior, which is to be promoting agriculture.

Now, some people may believe that promoting agriculture should trump nutrition anyway, because of the business interest and things like that. You can decide in your own mind about which of the two might be more important. If you believe that the public health is the more important priority — or at least an important priority — it’s not getting much attention as you can see from this.

Now there’s an interesting history to this. There were two people in 1973 who formed the agriculture subsidies that made a huge difference in the future of the country, and these are the subsidies that are still in place today. Can anybody guess who those two people might be? Not McGovern but it’s a good guess. Who was President in 1973? Nixon was President in 1973, so he’s one, and the other person isn’t somebody I would expect you to hear of, but if you’re my generation you would have heard of him, and his name is Earl Butz.

Earl Butz was a very — a visible and flamboyant Secretary of Agriculture. Usually nobody knows who the Secretary of Agriculture is, but at that time people did, because Butts was in the news a lot. He and Nixon had decided to put into gear a series of agriculture subsidies to help farmers. This was a well meaning thing based on the real need. Nobody knew that it was going to have nutrition consequences.

Essentially, what they decided to do was to subsidize very heavily some basic commodity crops in the United States, with corn and soybeans at the lead. The idea here is the American farmers were suffering in the world marketplace, and something needed to be done to help change market forces to support them. There was political unrest because of high food prices in the U.S. They wanted to promote maximum production of food in the U.S. They enacted the subsidies.

What this did was it slashed costs of raw products to the food industry. Because of the subsidies, corn and soybeans and these other things cost less in the marketplace, so the food industry could spend less money buying these commodities, and turning them into food products. These subsidies therefore made strong allies of groups that hadn’t been connected that well to one another in the past: farmers because they were having their crops subsidized and were able to make more money and could compete better in the world marketplace, and the food companies of course because they could produce food for lower costs.

During that period of time the production of certain things in the United States went up and the production of other things went down. What went up most significantly was corn, so you can see what happened here. There was this sort of steady increase in production of corn per acre — or the number of billions of bushels. Then out here we have a much higher number, and it was during this time that the subsidies went into effect. It had a big difference. It made a big difference on what was being produced in the United States.

It’s interesting to think about corn and cost. Now Michael Pollan wrote about this in an article in The New York Times in 2003. What he talked about was this intersection of industrialized farming, technological farming with pesticides, herbicides, fertilizers, genetically modified foods that we’ve all talked about before, and the incentives brought about by the subsidies to the industry. He said that this led to overproduction of certain things — in this case corn he was talking about — that dropped the price. The farmers had to grow more to maintain their income, because what they were growing was bringing less per bushel because of the high, high yields that were out there, and the market was being flooded with corn. This led to even lower prices; that made food cheap, and the calories have to be sold. And so what happens then is when the yields rise, again Pollan is being quoted here, the market gets flooded with grain and its price collapses.

As a result there’s a surfeit of cheap calories, a clever market sooner or later will figure out a way to induce us to consume.

An example of one consequence of this is the production of high fructose corn syrup. As you know, high fructose corn syrup is in a great number of foods. It has certain physical properties that make it attractive to the food industry, and you can see those listed here and it’s a very inexpensive high potency sweetener. People are worried about high fructose corn syrup. Scientists are doing studies on this, and they’re not all very favorable to high fructose corn syrup, and that may very well be why you’ve seen the recent ad campaign by that industry saying that high fructose corn syrup is really no different than sugar.

We’ll talk about this in the discussion when we come to soft drinks in a later class, but this is a perfect example of normalizing deviants, what the psychologists call normalizing deviants. You take something like sugar, that’s having a really bad impact on the population. Every nutrition body in the world says that the population should be eating less sugar. And here come the high fructose corn people that say, we’re no worse then sugar; and so the idea is that the deviance that sugar represents is normal, and therefore we’re normal ourselves because we’re no worse then them.

It’s just a brilliant marketing campaign, but some people would question its impact on public health. High fructose corn syrup has become possible, because in part because of the subsidies to the corn farmers, it becomes very cheap to sweeten things. High fructose corn syrup gets jammed into a lot of food, because it helps make them more appealing to people — especially sugared beverages.

This was written about in a book by an author named Greg Critser called Fat Land and he talks a lot about the subsidies history, and it’s very interesting. Here are examples of how the subsidies might work in the case of corn. The low cost of corn does several things. One is it becomes inexpensive to feed a cow or a chicken, or a pig, but we’ll talk about cows here in particular. So that makes something like this less expensive than it might otherwise be. Because of the high fructose corn syrup becomes inexpensive to sweeten things, as I mentioned before, and then the cooking oil that gets derived from things like corn and soybeans, gets used to fry things.

This combination of foods, which of course is what you get at a fast food restaurant, is being subsidized by the government. It’s almost as if you walk into a McDonald’s, you walk up to the counter and you say, give me the massive burger extra value meal, where you’re going to get a drink, and you’re going to get fries and you’re going to get the burger. It’s as if the government is standing there helping buy that meal. They’re standing there putting money into the cash register, so you don’t have to pay so much.

Whereas, if you say well give me the salad the government gets disinterested, backs off and isn’t helping pay for much of that at all. That’s partly why the distribution of food around the country is being affected by economic policy.

Here is an example. I actually went to — drove through a Burger King and a McDonald’s this weekend and updated a slide that I made several years ago. At a Burger King if you want to buy one of these things, here’s what it’s going to cost. The Whopper value meal, so that’s the big burger, the Whopper that has fries and a drink with it, costs $5.29. The Double Whopper now — so that’s a lot of food — $5.79. If you buy the salad with the same size drink that you get with the meal, it’s $6.38.

The same thing at McDonald’s. Here’s what these different things cost: so an extra value meal with a Big Mac $6.89, a ten piece Chicken McNugget meal $7.29, the salad with a drink cost $7.38. So there’s a disincentive to buy the salad. If you look at McDonald’s dollar menu what can you buy for $7.00 that that salad would cost, and have $.38 left over?

Well here’s an example, you could buy any of those things for the same $7.00. If you’ve got a hungry family, or you’re hungry yourself, and you don’t have a lot of money, and you need to fill up, what are you going to buy if you have $7.00? Now, the government’s not helping here. There are incentives across all parts of the food supply. For example, here are the amount of money per quart, per quart that various beverages cost: cranberry, orange juice, milk, Dasani water, and Coke and Pepsi. What’s a poor person going to buy? You see this across a lot of parts of the picture.

Chapter 5. Understanding Soaring World Food Prices [00:43:27]

Let’s talk about soaring world food prices. I began by doing that little quiz where you all got the right answer, that talked about what soaring world food prices would do — whether it would affect undernutrition, overnutrition, or both. Well, we got the right answer, the answer is both.

Let’s talk about just how bad the problem is today. This is a world problem happening today and it’s been taking place over the past two years, but 2008 has been particularly bad with this. 2007 was very bad as well. Food prices have gone up around the world. Let’s talk about why that’s happening, what the impact is, and what might be done about it.

There was an excellent photo and journalistic series in The Washington Post on this, and they have a photo gallery that you can access at the website that I’ve listed below. Here are some of the pictures that they have. So this was food riots in Bangladesh brought about by the rising food prices and people not being able to secure food; cooking oil shortages in China. You can see the number of people lined up trying to get cooking oil, a basic staple there; and then a mob stampeding for food in Indonesia, where you can see how desperate people are where the older frail woman there is being pushed aside by people who really need the food as well.

How big is the price increase? Well, it’s been pretty significant. These are data from the Food and Agricultural Organization in Rome, again part of The United Nations. The left hand side here shows the rising food prices in 2005, 2006, and 2007, and here are what the data looked like. The blue line is prices over each month of the year, January, February, and March. The blue line is 2005, the yellow line is 2006, and the red line is 2007. So the food prices were pretty stable in 2005, 2006, but they went crazy in 2007.

Here’s a sense on the right about what’s happened again over the months January, February, March, etc., on food prices in 2007 for different types of food. What you see are that food prices rose especially in certain food categories. So the green sugars, the blue cereals, the blue is sugars and the purple line here are dairy products. Other things went up a little bit but those went up especially high. There was a thirty-year high in these things for the food — the commodities. What you’re going to see is a series of lines, different colored lines, and they represent these foods that you see down there. So the yellow line, for example, would be dairy, and cereals are the purple line. This goes from 1990 to 2008.

Here’s what happened to food prices with all those things during that period of time. During that period things cranked along in a fairly stable way, although there was spikes that you see here and here, and then some dips in certain places that come about as a result of weather and things like that. But the big increase of course has happened out here, and these are significant increases in food prices.

Why are the prices rising so much? Well, there is a series of world and economic conditions that are helping push this. Small crops and crop failures brought about by weather conditions are playing an important role. We saw the terrible floods in the Midwest of the United States this year, but there have been floods, tsunamis, things all around the world that experts believe are related — at least in part — to climate change, which are making the growth of agriculture products more difficult and more vulnerable.

The biofuel that’s pushed by the subsidies in the U.S. has become a big problem, because a good bit of grain that’s being grown in the United States that used to go into the food supply is now going into biofuel. That itself is an extremely controversial area where some people believe it’s good, other people believe it’s terrible because it’s a very ineffective use of resources and energy. But whatever your position on the whole biofuel thing is, what’s indisputable is the fact that a lot of grain is being removed from the food supply.

There’s been diet shift in the developing countries, India and China, where people are eating more meat and that requires more grain to feed people, and as we talked about before, than if people just ate the grain in its original form. The high energy costs that we’re all noticing at the gasoline pump, affect all different parts of the agriculture chain and drive up prices in a big way; and then policies are affecting this as well.

Now The Food and Agriculture Organization has put together this terrific series of slides. II’m not going to go over them in too much detail, but you’ll have the website available, to go and look at them in greater detail. What they do across the top is they discuss in detail, some of the statistics that are related to each of these different things.

Each of these is related to the overall increase in food supply. So they start with trade restrictions and they talk about how certain countries, because they’re concerned with rising costs in their countries, have banned exports, and therefore want to keep the food within the country, try to drive down the prices locally. It does have the effect, but what it does is it changes the world market, and it also removes food from some parts of the market and makes it especially expensive in some parts of the world. So these trade restrictions are a player.

Next is the increased demand in Asia. And if you look at this — what I’ve boxed in up here, the per capita meat consumption in China went from 44 pounds in 1980 to 110 pounds in 2008. So the amount of meat being eaten per person has gone up. The population is growing, so that’s a lot of demand for a different type of food than that population was accustomed to eating.

Of course the numbers are here, as we talked about in earlier classes, how much more grain it takes if you’re going to eat the meat rather then just eat the grain itself. Of course there’s an energy cost, pollution cost, and everything else. So the increased demand in countries like India and China have become an issue on the world food market.

The weather has become an issue as well, and this seems to be happening in many parts of the world. If it were confined to a certain part of the world, you might say it’s just variation, just random things going on, but it seems to be happening in a lot of parts of the world. If you look at Australia, for example, this is the world — how much cereal stocks have-exist in that particular country 2006, 2007, and 2008. You can see the numbers have gone down. Tthe numbers have similarly gone down in their European union, and they’ve gone down in the United States as well. So there’s significant concern about the weather and about global warming in this.

The biofuels, as we mentioned, have become a big issue as well. The cost of foods have gone up as the demand for these grains being turned into biofuels has gone up as well. And then rising fuel prices of course is the last part of it, and this slide gives some statistics on that. These are big issues.

The issues that we have to ask ourselves, is will the prices continue to increase? That is, will things get even worse form the dire place we are now? Who’s likely to be most affected by this? What I’d like to do — so let’s go back to the original — on one of the slides I showed earlier in the class about how much money people spend on food. You would expect that in a country like the U.S., where people are spending relatively small parts of their income on food, that the population in general would be protected from rising food costs.

My guess is that most of you probably don’t think about this, care about it, or worry about it too much because of our economy and how much — how food is inexpensive in our country. It’s really not going to affect us that much; some but not a lot. If you’re poor in the United States it is going to affect you, and if you’re from a poor country and you’re down here, then you’ve got a big problem on your hands.

I’d like to play you a videotaped interview from this man, Jacques Diouf, who is the Director General of the FAO who talked in this series of video clips from The Financial Times about this issue, and this was a terrific series that The Financial Times did. What I’m going to do is just play several of these, but there are more and I’ve provided the website if you’d like to go and hear other ones [video].

That’s a remarkable statement: by 2017 the U.S. which is providing half of the world’s corn, could have to become an importer because so much of it is being funneled off for the biofuels. Next is a clip on who is most affected [video].

Next about biofuels and then there will be one more video.

This discussion links back to our discussion of the Millennium Development Goals in the United Nations about trying to deal with poverty by decreasing hunger around the world and also the green revolution, so he’s talking here about the opportunity that developing countries have if the green revolution can truly have a big impact there, if they can grow more grain they would be able to compete better on the world market even in the presence of the biofuel demand [video].

Chapter 6. Creating Sustainable Practices; Conclusions on the Economics of Food [00:59:47]

You can see how complex these issues are, and how many world forces are at play, and how difficult it will be to change this around because of the cooperation you’re going to need of countries around the world. One country changing its policies will help, but it could get undermined by other countries failing to take effect. The question is how much does the world care about rising food prices, the effect this has on poverty in poor countries, and can it unite to take advantage of the situation by creating sustainable practices in these countries?

The FAO has proposed a specific initiative to deal with the soaring prices, and the particular goals are here, again consistent with many of the things that we talked about with the green revolution to distribute seeds, fertilizer, animal feed and other farming supplies to small farmers quickly, so farmers get a better harvest this year and more food is available in the local markets. So that’s a short term thing. Let’s try to correct the problem now.

Advise governments on policy measures in response to the crisis, there possible effects, advantages and disadvantages. The FAO has approved a series of projects in 54 countries for a total value of close to $24 million dollars but more funds are needed urgently to help the most affected countries increase production in the upcoming planting seasons.

Now as was discussed in the video clip, there are some opportunities here. One is the opportunity for developing countries. If they can get support from the rest of the world to develop an infrastructure to try to make themselves less vulnerable to these high world food prices in the future. So the FAO and other organizations have talked about trying to create this agriculture infrastructure, to stabilize food prices and make certain parts of the world less vulnerable. They say that, although the soaring food prices are a terrible disaster around the world, if there is a bright side, it provides an incentive to invest in these infrastructures around the world. Places like The Rockefeller Foundation and The Gates Foundation, through their push to promote the green revolution in Africa, are trying to do just this.

There are some additional resources on the soaring food prices that I have listed here, some BBC clips and NPR clips, The Washington Post series that I talked about, and then the Financial Times video clip that you just saw; and there were others on there that we didn’t show are listed there.

Let’s conclude, and then I’ve got our comedy clip for today — Jim Gaffigan comedy clip for the day — on economics. First, economic factors are a profound driver of food choices, not only in the United States but particularly in other countries where people have to spend a higher fraction of their income on food. The low cost of food overall, promotes consumption; and in the case of countries like the United States, overconsumption. That’s how low food prices have become an issue in places like the U.S. High food prices can create some of the same problem as we’ve discussed. The problem isn’t so much low food costs, at least in the United States, but it’s the imbalance between what people pay for healthy and less healthy options.

The problem seems to be growing worse. You remember the slide that I showed about soft drinks going up 20% but fruits and vegetables by 117%, it seems to be getting worse, that the incentive, the economic incentive to buy highly processed packaged calorie dense, nutrient poor foods is going up, and to buy the things like fresh fruits and vegetables, is going down.

Neighborhood factors and poverty affect access to foods, and of course people in those conditions are most vulnerable to the price differences. The subsidies are not designed to promote health. Let’s go back to Richard Nixon and Earl Butz. When they put in the series of food subsidies, they did it to help farmers and to help the American agriculture world compete in the world market. This was a good thing.

I mean people didn’t quarrel with it so much at the time because it had a good impact, although there are people that at that time didn’t believe in big government and all that kind of stuff and things like subsidies. But overall, it seemed to have at least part or the desired consequence, where the United States became an agriculture monster, if you would, in the world marketplace; monster not in a bad way but a big player in the world marketplace.

When these subsidies went into effect, Nixon, Butz, nor anybody else anticipated the nutrition consequences, so you can’t blame them for having a policy that ultimately is leading to bad diet. However, we do know now and we’ve known for ten years, twelve years, fifteen years about the impact of subsidies on diets. But they’re not changing, and it’s because of the powerful political force of the food industry.

I’ve talked to senators in Washington when we’ve been down there visiting, who will say things like, we’ll talk about anything on the nutrition front but we can’t touch the subsidies. It becomes such a powerful issue, and they don’t want to tangle with those powerful political forces. So the subsidies remain intact. In fact, in the most recent version of the Farm Bill, the subsidies were basically left untouched. Food costs can promote both hunger and obesity in the ways that we talked about.

So economics are a pretty important player here and something really needs to be done in order to change economic policy and we’ve talked about some of the things. We talked about incentives to get supermarkets to open in inner cities, changing subsidy policy; some people have even discussed the possibility of using tax policy. Would it be possible or advisable, for example, to put a tax on high calorie processed foods that are contributing to obesity and poor diet? Let’s just say soft drinks and fast foods, for example. Then that would generate enormous amount of income, that money could then be used potentially to subsidize healthier foods and bring down their cost. So would that be something people would support? Well, everybody has a different stance on taxes and subsidies and things, but it certainly is a possibility that it’s looking into in more detail.

Now in one of the future classes you’ll read an OpEd that I wrote in The New York Times in 1994 talking about this idea of taxes to do just what I said: taxing unhealthy foods, using the money to subsidize other foods. At that point I got completely blistered when that came out. Rush Limbaugh was on me minutes after that came out in The New York Times. He went after me three or four, or five other times on his program for this. The Wall Street Journal wrote a critical editorial about me and the idea, and so there was really — it stirred up a lot of interesting controversy because people hadn’t talked about it before. I’m not sure whether it’s a good idea even today, because the economists haven’t done enough work to model it.

But the idea is becoming more acceptable, so now public opinion polls show that more than 50% of people — and that number seems to be rising — support the idea of a tax if the money is earmarked for good nutrition. There are countries, Australia, England, and Ireland in particular, where the national governments have talked about the idea of a tax.

So from the point in 1994 where there was very little support and a lot of critical reaction people have seemed to have warmed up to the idea now and it could be that it’s just the pressing economic and diet problems around the world that are helping drive this.

[end of transcript]

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