Obesity as a market failure

The obesity epidemic is out of control. Since 1980, obesity rates have tripled in most countries, and there are now almost two billion overweight individuals in the world. Policy recipes to fix the problem abound. More education, fewer cars. More bicycles, less TV. The list goes on and on. So far, though, public-health interventions have failed spectacularly. But why?

Although the rise of obesity is often described as an effect of specific individual and lifestyle choices, the problem is largely a byproduct of deeper political and economic changes in society.

In a recent study published in the Bulletin of the World Health Organization, a group of researchers, led by myself, found that, when compared with more protected economies, countries adopting more aggressive deregulation policies experienced faster increases in body mass index and consumption of fast food and soft drinks. After taking into account alternative explanations and competing risk factors, we concluded unequivocally that the freer an economy is, the fatter its people are.

How does an unregulated market relate to the rise of obesity? Through market concentration and the rise of food oligopolies that flood markets with cheap, unhealthy, ultra-processed products, in addition to fast food and soft drinks.

It may seem paradoxical, but unfettered market competition tends to naturally degenerate into market oligopolies. This happens because, in a market without rules, the winners of a competition find it more profitable and rational to suppress the very competition that made them win. This often translates into a gradual decline of smaller economic actors, which are pushed out of business or “swallowed up” through mergers and acquisitions, or what can be called “corporate cannibalism.”

This is more or less what happened in the food and agricultural sectors beginning in the 1980s, at the beginning of the so-called “deregulation revolution.” It is exactly during this period that worldwide dietary patterns dramatically changed toward ultra-processed products.

The rise and consolidation of food chains, and the decline of local food systems and small farms, was first felt in the very country that led the “deregulation crusade”: the United States. But as the old saying goes, “When the United States sneezes, the world catches a cold.” Deregulation went global and ultra-processed products crossed national borders one after another.

As food systems became increasingly dominated by ultra-processed products, fast food, and soft drinks, food oligopolies made enormous profits and acquired the power to set prices at will and determine the terms and conditions of their market sectors. Large food corporations became very active politically, and lobbied against regulations designed to safeguard public health and protect small farms.

“Foodopolies” have also aggressively invested in food advertisements shaping preferences and tastes, especially of young customers. It has been estimated that 96 percent of American schoolchildren can identify Ronald McDonald, and that the only fictional character with more recognition is Santa Claus.

So, what needs to be done to stop obesity?

A good way to start would be to introduce an “ultra-processed food tax” on unhealthy products such as fast food, snacks, and soft drinks. Corporate libertarians may consider taxation an unfair intrusion in market affairs, but even Adam Smith supported a sugar tax. In “The Wealth of Nations” (1776), he wrote, “Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are, therefore, extremely proper subjects of taxation.”

Revenues from an ultra-processed food tax could be used to subsidize fruits and vegetables and small farms growing fresh and healthy products. According to our study, Switzerland has experienced the slowest increases in body mass index and fast-food consumption per capita. It is no coincidence that most Swiss farmers are small producers, and that almost 60% of their income comes from government subsidies.

We also need reforms to discourage large-scale industrial agriculture that uses excessive amounts of fertilizers, pesticides, chemicals, growth hormones, and antibiotics, and it is crucial that we enact tighter regulations on packaging and labeling of food items and advertising of unhealthy products, especially for children. But perhaps the most important reform is the adoption of anti-trust laws to reduce market concentration in the food and agricultural sectors.

Of course, all these regulations can hardly occur without deeper, more systematic changes in the political economy. Since the beginning of the “deregulation revolution,” global and national economic policies have been increasingly affected by the ideology of the “self-correcting market.” But as the 2008 economic crisis showed, this ideology is awfully inadequate. As American economist Arthur Okun once observed, “the market needs a place, but the market needs to be kept in its place.” Governments need to take steps to regulate the market system’s built-in tendency toward consolidation and externalities.

Obesity is an example of market failure. As long as the food and agricultural sectors continue to be dominated by the ideology of “small government and big business,” our chances of winning the obesity war remain slim.

This article originally appeared at www.themarknews.com

Author Infomation

Roberto De Vogli
Roberto De Vogli
Roberto De Vogli is an Associate Professor in the Department of Public Health Sciences at the University of California, Davis. He led a study published by the World Health Organization (WHO) that explores the relationship between obesity and market deregulation.
  • 5


    The apparel industry isn't helping redefining size of clothes year after year as body mass increases. I heard of female stating my clothes size hasn't changed in years and yet their weight increased by 10~20Kg. Another is soft drinks. The habit of drinking sweetened drinks should be frowned upon and should be limited. Food portions and eating habits should also be scrutinized. Eat small portions of various dishes gives time for the brain to interact telling you are full as you are waiting for the next dish. Lastly enjoy company mingling with them as you eat since this slows the pace of eating giving time to metabolize the food you had eaten again sending a signal to the brain that you are full.

  • -4


    he problem is largely a byproduct of deeper political and economic changes in society.

    All of these wanna be policy wonk goofs love to see political problems and political solutions behind every nook and cranny.

    Here's a thought, people like EATING. Give people more access to cheap food, they're gonna get fat.

    Ain't complicated.

  • -4


    This writer seems to be advocating total government control of everything bought, sold and eaten with the aim of preventing obesity. This approach has been applied with great success in North Korea, which now has just one fat guy in a population of 25 million skinny people.

  • 1


    Perhaps governments should put pictures of blubbery humans looking like elephant seals in swimming trunks and bathing costumes on a beach or photos of clogged arteries on Big Mac boxes in the same way as some show pictures of emaciated cancer sufferers or black lungs on cigarette packs. I don't believe the government can or should dictate what people choose to eat but it can make people aware of the dangers.

  • 4


    Much of obesity can be blamed on the simple theory that if you take in more calories than you burn, you will gain weight. But this issue is much more complex than that. There are several more or less obvious reasons for the dramatic rise in obesity besides the reasons stated in the article. There are increased portion sizes of restaurant food and grocery products, increased modernization, driving, and computer use including sedentary activities. Certain types of medication can decrease metabolism rate. Genetics, endocrine disorders, and even the changing perception of what is normal weight are also legitimate reasons. However don't think that eating fat gets you fat. Much more so, it is eating an excess of simple carbs, including high fructose or fruit sugar that will lead to a cascade of disastrous metabolic effects in your body. The bottom line is that fructose leads to belly fat, insulin resistance, metabolic syndrome and could result in many types of chronic disease.

  • 2

    Ed Smith

    We as a culture are growing more obese because our food is unfit to eat and exercise has become impractical or dangerous. "Ultra-processed" "food" are really food substitutes, not genuine healthy biocompatible sustenance. The ultra-processed tax is a good idea to fund both more healthful community development and mitigating the costs of medical complications which arise from eating such substances. There needs to be cultural efforts (genuine efforts in culture, not merely propagandist or disingenuous noisemaking) to make exercise opportunities available, practical, normal, typical, and safe.

  • 3


    A big reason obesity is on the rise is because Western society has become too accepting of it. There's not as much shame in being obese as there was in the past. Japan has a ton of candy and fast food but why is the obesity rate only 3% here? Because the ijime culture of Japan looks down on obesity so people are less likely to eat to such excess.

  • -2


    Food, alcohol, cocain, marijuana are all drugs that we use to deal with the tortuous boredom and vapidity of modern life ("modernity"). Plus, the main method of pressing processed food through all those machines is to load it with lard, because lard moves through the machines real fast. Strangely, Japan has a world famous food culture, and yet, obesity is rare here (although increasing over the past decade).

  • 2


    However don't think that eating fat gets you fat. Much more so, it is eating an excess of simple carbs, including high fructose or fruit sugar that will lead to a cascade of disastrous metabolic effects in your body. The bottom line is that fructose leads to belly fat, insulin resistance, metabolic syndrome and could result in many types of chronic disease.

    Novenachama is correct, it is the overconsumption of carbs that is making people fat. So called "healthy" whole grain bread, rice, fruit etc. etc. is making you fat. Eating a lot of fat is not bad for you. The Ketogenic diet has proved this again and again.

    Also it is not true that all Japanese are skinny and healthy. Obesity rates have been rising over the years, and so many of these so called "skinny" people are in reality skinny fat.

  • 0


    "aggressive deregulation policies experienced faster increases in body mass index and consumption of fast food and soft drinks"

    Po-ta-toe, Po-tay-toe. With bacon, melted cheese and sour cream. As far as aggressive deregulation policies being the "cause" of obesity? The sins of deregulation are riddled through out the world, but obesity? Didn't the internet cause that?

  • 1


    I know why I'm fat... I don't need some yank professor telling me it's down to politics.

  • 1


    I've never been to America but most American I saw here are overweight (more like morbidly obese) so I guess things are pretty bad over there.

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