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When the free market fails, governments should intervene

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  • When the free market fails, governments should intervene

    Good to see that SMH journalist Ross Gittins shares the view that the government should take some responsibility for the obesity epidemic. The government is obviously doing very little (some ad and awareness campaigns and that is all) and whether this is 'enough' depends on whether you believe governments are in some way responsible in the first place. Ross Gittins mounts the persausive argument that the government is right to leave things to the free market if the market does its supposed job of creating a good environment (which it is meant to) but that governments should intervene when the market fails. The obvious analogies are smoking and traffic regulations - if the government didn't intervene in these areas we would have a far higher death toll through extra smokers and more dangerous driving.

    At the moment we have a rising obesity toll but a government which says - "this isn't our job to do anything about this, it's up to individuals". Unfortunately we have an opposition which doesn't have the foresight to take advantages of the weakness in current government policy:

    Kilojoules, kilograms and killer diets
    Email Print Normal font Large font June 28, 2006

    When obesity is the far too wide bottom line, there's a case for intervention to correct market failure, writes Ross Gittins.

    There's nothing like going on a diet to make you realise the world's become a conspiracy to make us fat. It's certainly helped me understand why so many of us have a weight problem. We're presented with temptation wherever we look. Whether you're running a supermarket, a food store or a restaurant, it's only ordinary business sense to make your product as enticing as possible.

    You make it look good, smell good and taste good. How do you make it smell good? Fry it. How do you make it taste good? Use sugar, or salt or fat - or all three.

    Talking to people in the catering trade leaves me with the impression that just about anything you buy in a cafe or restaurant is cooked with more oil or fat than you'd use at home.

    They need to make it tasty so you'll enjoy it and come back again, and the easiest and cheapest way to do that is to use more fat.

    Of course, now so many of us have become more weight-conscious, the big fast food chains have seen the light and are offering salads and rolls and other healthy alternatives.

    Which is great - until Choice runs a check and discovers many of the "healthy alternatives" have been laced with more salt and fat than the chains' brand-name hamburger. Why do they do such a sneaky thing? Because salt and fat sell. If we want to feel virtuous while we load up with more of the irresistible ingredients, they're happy to oblige.

    When you're trying to control your weight - which surely most of us are, or ought to be - there's a long list of everyday foods we should indulge in only on Christmas Day and special occasions: chips, pies, hamburgers, pizzas, battered fish, all pastries, cakes, biscuits, confectionery, most desserts and flavoured drinks. How on earth are we supposed to resist all those? And when we see so many of our friends indulging, it's hard to act like a celibate.

    Thinking about the developed world's obesity epidemic tells me its fundamental causes are economic. It constitutes a damaging side effect of technological advance and economic growth.

    The average weight of people in the developed economies has been rising for more than a century. Until relatively recently, this was regarded as a healthy development because most people were underweight.

    Presumably, this was because they couldn't afford enough food. As we became more prosperous, however, more people's weight became excessive. From about 1980, average weight started really shooting up. Then we noticed how fat so many children were becoming.

    As a matter of arithmetic, an increase in weight must be caused by a decrease in kilojoules expended or an increase in kilojoules consumed - or a bit of both.

    On the expenditure side, we've been taking the physical exertion out of work since the start of the industrial revolution.

    In our private lives we've made increasing use of lifts and cars. Particularly with the advent of television - but now with the addition of many other screen-based forms of entertainment - we've moved to more sedentary forms of leisure.

    Even so, the sudden surge in overweight and obesity seems to be better explained by developments on the consumption side. According to a study of obesity in America by two economics professors at Harvard, David Cutler and Edward Glaeser, in the 1960s the bulk of food preparation was done by families that cooked their own food and ate it at home.

    Since then, there's been a revolution in the mass preparation of food. Technological innovations - including vacuum packing, improved preservatives, deep freezing, artificial flavours and microwaves - have enabled food manufacturers to cook food centrally and ship it to consumers for rapid consumption.

    This greatly reduced the "time cost" of food production, both at home and commercially. So we eat more meals - more snacks - and the snacks are more likely to be mass-produced, high-kilojoule (that is, high-fat, high-sugar) treats.

    I need hardly remind you that our growing obesity problem has serious implications for our health and the cost of health care. It's leading to increases in type 2 diabetes (what used to be called late-onset diabetes until kids started getting it), heart disease, several types of cancer, musculoskeletal disorders, sleep apnea and gallbladder disease.

    Do you see where this is leading? As has been argued in detail by the obesity specialist Professor Boyd Swinburn of Deakin University, the health economist Professor Jeff Richardson of Monash University and Dr Rob Moodie of the Victorian Health Promotion Foundation, what we have here is an unusual but serious case of "market failure".

    The capitalists are only doing what comes naturally and using all their wiles to flog their food and make a quid. But when the rest of us do what comes naturally and yield to their blandishments, the result is major social and economic dysfunction.

    Because nutrition used to be hard to come by in the forest, humans have an evolutionary predisposition to load up with all the energy and salt that comes our way.

    That leaves many of us with a self-control problem. The benefits of eating are immediate, whereas the costs are long-term and uncertain. This serve of chips won't make me fat and give me health problems (true), so I can always swear off chips at some time in the future.

    With such indisputable evidence that a significant proportion of people - including children - are having trouble regulating their food intake, it's simply idle to respond that they should exercise more self-control.

    Clearly, they can't - as their unsuccessful struggles with diets confirm. It's not for want of trying.

    When market failure is demonstrated, and is known to have serious consequences, the case for government intervention is established. One obvious corrective would be to limit the use of advertising to induce over-consumption - particularly by children.

    After all, there's ample precedent for such intervention to protect our health against the excesses of an unfettered market: tobacco control (pricing, advertising and promotion restrictions, smoke-free restrictions), road trauma minimisation (mandatory seat belts, speeding and alcohol restrictions) and injury prevention (restrictions on firearms, fireworks and safety regulations).

    Politicians who won't take effective action to control obesity can't claim to want to limit the growth in taxation.
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