More food writers should be making this kind of point

by on June 15, 2012 at 2:58 am in Economics, Food and Drink | Permalink

Arabic Knowledge@Wharton: So when companies like Wal-Mart bring their logistics ability to Africa, it actually could be a good thing for the poor people of Africa?

Cowen: It’s exactly what we need more of. Yes.

Arabic Knowledge@Wharton: Yet there’s a fear Wal-Mart will put the smaller stores out of business.

Cowen: Yes, they do so sometimes, but they do so by charging lower prices. It makes it more accessible and more reliable. It’s not just the pricing at any one point and time. It’s what happens in the very worst periods. Companies like Wal-Mart are very, very good at keeping up supply and being regular.

Here is more, in interview form.  Much of the discussion is about the Middle East:

Plus, it depends on which country in the Middle East you’re talking about. So Tunisia is better run than most places. Lebanon has a saner agricultural policy than most places. Yemen is a total disaster. Algeria and Egypt have not gone so well. So there’s a lot of variety within the Middle East. If you think of a model like Turkey, which isn’t technically in the Middle East, they’ve liberalized and encouraged agribusiness. Turks are much better fed than 20 years ago. When you ask a country like Iran, what should we do? It’s hard to know even where to start.

And this:

I’m not even sure Yemen is even a viable country because there’s some chance, they will literally run out of water in the next 20 years in a lot of parts of the country. At this point, I don’t know what they can do.

1 Gilles June 15, 2012 at 3:24 am

If Turkey isn’t technically Middle-Eastern, why should Algeria and Tunisia be?

Better logistics for food supplies is the right thing, the question is whether an essentially agricultural economy has an interest in increasing competition for food supplies of supermarkets, with a risk of foreign dominance if their prices are more competitive.

2 John June 15, 2012 at 8:02 pm

Even though he’s saying “Middle Eastern” I think he’s thinking “Arab.”

3 bob June 15, 2012 at 3:49 am

Wow, I actually had never thought about Lebanon’s agricultural policy before. If it’s sane, surely it’s sane for the reason that no one has ever thought about it. Unfortunately now it’s like a googlewhack or a deviation from the efficient markets hypothesis, in the sense that it disappears as soon as people become aware of it.

A lot is sane in Lebanon, anarchy works wonders. Everything works in a profoundly human way.

4 Rahul June 15, 2012 at 4:33 am

I think if they [wealthier Gulf nations] became a little more obsessed with, say Indian or Chinese food, they’ll do better [healthy eating]. There are issues with diabetes and obesity in many of these wealthier Gulf nations.

As if Indian food was healthy! India is the diabetes capital of the world.

5 dead serious June 15, 2012 at 9:33 am

Want to lose weight? Add lots of paneer, thick yogurt-based sauces, duck and fatty pork into your diet!

Middle Eastern food is healthier than Chinese or Indian food.

6 RM June 15, 2012 at 11:13 am

I agree, but I think that the problem is that the wealthy in wealthier Gulf countries eat large quantities and increasingly eat fries and hamburgers. Indian and Chinese food are bad, but in reasonably quantities and with variety a whole lot better than fries and hamburgers.

7 dead serious June 15, 2012 at 11:30 am

Agree.

8 AJ June 18, 2012 at 8:44 pm

That’s ridiculous. You’re thinking about Indian food that we eat at restaurants in Western countries. Home-cooked traditional, everyday Indian food has vegetables and beans as bases, with whole wheat or other healthy grains and yogurt, and smaller amounts of rice. Yes, there’s some oil, but not all that much, and there is very little refined sugar and flour.

9 bartman June 15, 2012 at 12:40 pm

No, Qatar and Abu Dhabi are the diabetes capitals of the world.

The diets have gotten very bad there, but the problem is more the general lack of exercise. Having all those oil rents means hiring lots of cheap labor to do everything for you, including spoon-feeding your kids as they sit on their arses playing Nintendo. It’s not uncommon for Emiratis to wait just inside the door of the mall, hotel, restaurant or movie theater as their driver fetches their car from the underground parking lot!. Many are loathe to walk more than a dozen yards at a time.

But they’re happy to spend multi-millions to entice the very best Western diabetes clinics to open local branches.

10 Richard June 15, 2012 at 3:40 pm

We’re glad to do so! Think of it as a way of recouping some of their profits from oil exports.

11 GW June 16, 2012 at 4:22 am

The traditional Indian diet, the south Indian vegetarian diet, is very healthy. The problem has likely been the relatively sudden introduction of refined sugar and white flour into the diet of a fairly endogamous population accustomed, for hundreds if not thousands of years, to a diet with little if any refined sugar.

12 Rahul June 16, 2012 at 4:40 am

That’s simplistic. The S. Indian diet is quite carb heavy; I bet a glycemic index disaster if you analysed it. In addition it is heavily supplemented by fried items. If you want empirical evidence look at diabetes rates in S India: not low at all.
Also arguing about whether “traditional” diets were healthy is futile; that’s a fantasy diet no longer in existence and unlikely to reappear.

The basic problem is that many Indians (mostly the white collar classes) moved from scarcity-mode into relative plenty very quickly. Simultaneously the amount of physical labor declined sharply. Exacerbating the problem was that the modern Indian lifestyle left very little time or facilities for exercise. e.g. An average Mumbai resident commutes ~2 hours a day and that metropolis of ~15M population has about 15 functional public swimming pools.

13 Adam June 15, 2012 at 9:32 am

When Wal-Mart is the only store left in the area, after the smaller firms can no longer compete since they do not have the power to bully their suppliers into lower prices, would it not have the ability to then raise prices higher than they ever were before? In the short-run it certainly is beneficial, but in the long run I cannot see how it would not lead to higher prices since there would no longer be competition. Please advise.

14 Mike June 15, 2012 at 9:47 am

If prices are higher than ever, Target would open up a store and undercut them.

15 anon June 15, 2012 at 9:58 am

Please advise.

Uh, lack of familiarity with how competition works?

16 bartman June 15, 2012 at 12:12 pm

Please show us an example where predatory pricing actually worked.

17 Rahul June 16, 2012 at 1:21 am

Yep. Absolutely no empirical evidence that this happens with Walmart.

18 dan1111 June 15, 2012 at 5:03 pm

This only works if there is some sort of barrier to entry. For example, Microsoft has been able to dominate the operating system market, even against competing products that are free, largely because compatibility is so important for computers. Once Windows became dominant, it was hard for anyone else to gain a foothold.

There is no mechanism like that for Walmart. Once they artificially raised the prices, there is no barrier to competing stores opening, and suppliers would have no reason not to sell to them.

19 Bill Drissel June 15, 2012 at 9:54 am

Dr C
The common usage, “Walmart puts xxx out of business,” is totally mistaken. If anyone “puts” xxx out of business, it is former customers who prefer the quality/price at Walmart.

Bill Drissel
Grand Prairie, TX

20 dan1111 June 15, 2012 at 5:04 pm

+1

21 Tom June 16, 2012 at 9:57 pm

I think focusing on just lowering consumer prices as the be all end all of what’s good for society is a bit short cited. So, communities with WalMarts have higher standard of living than those without? I mean look at all the people that choose to live in rural Arkansas as opposed to NYC, Boston, San Francisco, etc.

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