The Age of Government in Food and Agriculture
Wed, Jun 23, 2010
Author: Judson Berkey (5 Articles)
Judson Berkey is a Managing Director in the Operational Risk Control function in UBS, responsible for the Operational Risk Framework and coordinating operational risk activities across the worldwide operations of the bank. He is an expert on international regulatory frameworks for agriculture, finance, and e-commerce. He resides in Zurich, Switzerland.
Governments have become more active across the entire economy and this is no less true in food and agriculture. However, what is often portrayed as a choice between free market and regulation often seems misguided. It is not really a question of whether to regulate or not but rather what goals we are trying to achieve and what are the right tools to help achieve them.
One area where we seem to be still trying to define the goal and then find the right role for regulation is agriculture and climate change. Climate Change will have a large effect on ecosystems and thus agriculture. While there was broad acknowledgment at Copenhagen that agriculture needs to be addressed in any climate regime the how was not clear. For an alternative view see this commentary posted on the Civil Eats blog shortly after Copenhagen.
Related to this is the effort to create markets which would facilitate payments for ecosystems services (PES) that might be recognized under a climate change regulatory regime. Thus, these could be used to direct agriculture production to certain methods. A good introduction to this topic, with a focus on West Africa, is found in this background report on Katoomba Group’s Ecosystem Marketplace.
Another topic where the regulatory approach is up for debate relates to nutrition. Often this is a debate about the best way to try to tackle the obesity problem. Some have argued for taxes on junk foods and it appears that Romania is the first country to try this. a href=”http://www.foodpolitics.com/2010/01/new-york-citys-new-health-initiative-salt/”>Others advocate regulatory targets backed up by fines or other penalties. New York City has been in the forefront here first tackling trans fats, calories, soda, and now salt. General food labeling is another possibility although the idea of traffic lights seems to have died in the EU.
A third area where the role of regulation is often a subject of discussion is the effort to develop more local food production. In the US, Whole Foods Markets is trying to get USDA approval for mobile slaughterhouses that would provide some of the infrastructure necessary to expand local food production. For some discussion of this effort and the concerns that it merely replaces market power of big processors with big retailers see here.
The US based Wallace Center sponsored a report in 2009 on local food businesses. This case study based report contains a wealth of information on the facilitating conditions and regulations that contributed to the success of certain local food businesses. Most interesting is that this report is not just US focused but actually spans the globe with its case studies.
To tie together these last two areas, researchers at MIT released a report in 2009 arguing that increasing local food production is key to helping address the obesity problem in the US. The main thesis is that the decrease in local food production (only 1-2% of food consumed in the US is produced locally according to the report) has led to a situation where energy dense, high calorie products are cheap and readily available while more nutritious foods are expensive or difficult to acquire or both. The research can be found at http://web.mit.edu/newsoffice/2009/foodshed.html
What ties these all together for me is the effort to find the right role for regulation of markets. For all markets require regulation – it is merely a decision about what kind and how. Regulation provides the rules within which the market players operate and as such what is really required is a discussion about the value choices of society. We must determine what we consider important and then it should be a decision about the most efficient, effective, and fair way to get there. Regulation is only a tool to help.
Judson,
I think you have touched on a topic which I am sure will provoke a barrage of response. I think that there is a need to find the perfect balance between free market forces and government regulation. This balance is not a set formula, however, and should be different within every industry, or even particular sectors. We need regulation when it comes to our food supply in order to ensure that the food we are consuming is safe. On the other hand, we do not need the government to tell us how to eat by taxing seemingly unhealthy food items.
In terms of the “Western Diet” and its relationship to obesity, it is no secret to us here on goodeater that the unhealthy eating habits of millions of Americans is perpetuated by advertising and a flood of cheap nutrient-free foods into the market. This can and should change though with a movement towards public education and awareness. It has to begin with private groups and NGO’s and must be supported by the media as well. Unfortunately the media is afraid to fight this battle because much of their business is supported by these food marketing dollars from the major food companies.
By making people eat less sugar and “crap food” because it is taxed or more expensive does not solve the problem. This is a bandaid that will only help temporarily. The goal should be to decrease or eliminate the need for these products as a whole.
I don’t know how I feel about that MIT report, as it overlooks a larger problem and that is the fact that we choose to spend as little money on our food products as possible. Food is seen as a commodity, not a luxury, not a pleasure. If there was a pill people could take at the beginning of the day and not have to eat at all, I am sure millions of people would do this as they see no value in the culture that surrounds good food; there is no desire to reach a sense of culinary mindfulness in this country. It is a cultural disease that is forcing us to concentrate less and less on the food we eat, local or not. Instead, our money is spent on more material items, frivolous crap. You will pay the same price for a great heirloom tomato from canada as you will for a local one, but this doesn’t really matter if people aren’t even shopping for produce. It is not as if sudden accessibility to local foods would change people’s eating habits and make them any less obese, it would just mean local foods would be rotten on the shelves instead of imported produce.
As for the mobile slaughterhouses, this is a great way of side stepping regulation. Regardless of the demand for local and humanely-processed meat, farmers are having difficulty getting their animals slaughtered under USDA inspection at the appropriate time (read–regulation). There is clearly a shortage of USDA approved slaughterhouses available for local famers. So in a sense these farmers managed to side step the regulatory pressures while still maintaining the integrity of the system. This is a prime example of an appropriate (and might I add creative) balance.
In conclusion, the government should not tell people how to eat, or force them into it through gratuitous taxes. People should relearn how to enjoy food in our country. It’s all about education.
Andrew
Thanks for the reply and very good point about what price people are really willing to pay for their food. It does seem like we are arrived at the point where a large number of people and the overall system has been set up to treat food as a commodity item rather than a luxury item. Some interesting thoughts on this from an EU study here http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:128:0111:0115:EN:PDF
Judson
I feel like we’re looking at three separate things here:
1. The way the rules of the game are currently structured
2. The shape the market has taken over time in response to that framework
3. The cultural edifice that has developed from this over time.
These are obviously interlinked and cyclical. But I point this out particularly to draw out the second item. Because of the regulatory and subsidy structure, over time, we have developed giant supply chains for delivering cheap grains and meats to society. These supply chains have such economies of scale that they can now sell chicken, pork, etc., at unbelievably low prices.
As a result, people eat more meat than ever before. So the culture of meat eating grows, further increasing demand, and further increasing economies of scale. Now we’re at a point where 99% of our farmland is used for animal production and feed production. Getting a fresh head of broccoli on everyone’s table is now relatively expensive, people are culturally pro-meat, and there are huge lobbying forces backing meat production.
Just wanted to point out the feedback loop.