Even without globalization, modern production systems have rendered it difficult for individual consumers know where and how their food is produced and handled. Unlike in the past when people kept gardens or bought foods from their localities, consumers in the modern world consume foods that may have travelled thousands of miles and handled by tens of agents across the supply chain. In this case, optimal consumer decision-making is heavily hampered by information asymmetries. Individual consumers have neither the capacity nor the intention to fully ensure, or determine the safety of their food, which is why they not only need, but expect that governments ensure that food meets the highest possible standards of safety/quality. The integrity and safety of the food supply is a fundamental requirement for consumers, and has implications on the country’s health and even national security. Governments have the sole responsibility of protecting its citizens from outbreaks of foodborne diseases (such as E.Coli), chemical contaminants and even anxiety spurred by modern farming and food production systems.
In a free market system, consumers are expected to be the best judges of their own interests, which should subsequently lead to the optimal allocation of resources. Ideally, unsafe, bad or poor quality food would be met by a lack of demand, which would subsequently drive it out of the market. However, the real world market is characterized by myriads of imperfections, which render it impossible for consumers and other economic agents to make optimal decisions, which necessitates government intervention. Perhaps illustrative examples of failed government regulations can best illustrate the necessity for intervention. The failure of governments to impose regulations on tobacco, resulted in nicotine addiction for millions of people across the world, coupled with deaths due to cancer. While tobacco is not a food item, the need for regulation is not any different. For instance, according to the American Diabetes Association (2012) upwards of 29 million Americans are either diabetic or are in the initial stages of developing the disease. The problem is closely linked to the fast foods industry in the country, which leads to the consumption of high energy foods, which when coupled with the increasingly sedentary lives by many Americans lead to diabetes. Other suppliers deliberately sale foodstuffs that they know, or have reason to know that they are harmful to the health and safety of the consumers. For example, Coca-Cola is known to used artificial sweeteners in drinks sold outside North America and Europe despite bans by the Food and Drug Administration because the ingredients are believed to be carcinogenic. These examples offer a perfect reason as to why governments must ensure that food does not endanger the safety and health of the consumers.
The government’s regulatory responsibility and the necessity of the same also stems from the fact that there are many and continually changing threats to food safety and quality, than average consumers can keep abreast of. Food hazards may include improper agricultural practices, inadequate preventive controls in processing and preparing food, contamination, use of hurtful ingredients, poor storage and lack of hygiene across the supply chain. The main challenges to consumers (and indeed regulators) include the rapid innovations in the food production technologies, processing as well as marketing strategies; rapid urbanizations and changing lifestyles among consumers; rising cases of foodborne diseases; and lack of consumer awareness of food quality/safety issues. Given these factors, coupled by the fact that suppliers may exploit them to the detriment of the consumer, whether unknowingly or unscrupulously, governments have an important role to play.
The main reason governments can intervene in the market to ensure a level playing field is its capacity. Resources limit individuals, even if they wanted to regulate food supplies. Governments, on the other hand, have agencies and other arms that have a national reach, which enables them to effectively regulate the production, distribution and marketing of food. Governments enjoy scale economies too, which means that they carry out their regulatory responsibilities more efficiently compared to private individuals and organizations.
The United Nations Department of Economic and Social Affairs (2003) sums up the need for government regulation of the food industry aptly. This is is not least because private companies and individuals are solely driven by profit, and since consumers have a disadvantaged access to information, suppliers are not only likely to, but have in the past been known to exploit these information asymmetries to the detriment of public health. Consumers face imbalances educational levels, bargaining power and economic terms, governments must ensure that products that are available on the market are non-hazardous. For instance, in order to prevent the exploitation of vulnerable populations, some states in the US (such as New York and California), have already passed legislation to prohibit fast food advertising that is targeted to minors. Similarly, federal and state governments have introduced regulations to increase taxes, change applicable licensing requirements and other controls to limit the availability of fast foods.
The regulatory role played by the government is also founded in the urgent need to promote the common good. It is unarguable that the food has implications on the health and safety of the country. Without a safe and reliable supply of food (food security), which in turn affects the national security. Similarly, if the food supply is unsafe, the care health care costs would spike. At the same time, the economy’s productivity and economy will suffer. Individual firms or suppliers are incapable and uninterested in looking at the bigger picture, and thus only governments can play this role effectively. In its role as a promoter of the public good, the government can use taxes and subsidies to discourage or promote the production or demand for certain foods. Case in point: organic foods farmers in the United States and other suppliers that sell fresh/healthy foods often qualify for subsidies and rebates. Similarly, the government has a responsibility to ensure safe and sustainable production and distribution technologies and practices, without which it would be impossible to prevent things such environmental protection and use harmful chemicals.
The government’s responsibility for protecting consumers from unsafe food also flows from the need to ensure consumer confidence. Without consumer confidence in food supply, exchange of foodstuffs will be massively hampered. Consumers are unlikely to trust supply if they are unsure that producers and distributors adhere by the highest safety and quality standards. The government’s involvement creates consumer confidence, which in turn creates reasonable expectations by consumers that the food supply is both safe and of the highest standards. This benefits both consumers and suppliers. If the consumers trust the quality and safety of the food supply, they easily provide a ready market for the produce, as against if they fo not. Consumer confidence serves to create robust markets, which have a positive impact on the country’s economy. This is not least because if consumers lose confidence in the safety and quality of food, they may be forced to grow their own or take painstaking individual measures to ensure that they access to safe and quality food. If this was to happen, specialization by economic agents would be hampered, and with it, there will be a reduction in productivity and economic efficiency.
Free markets are incapable of effectively regulating the food supply chain. This is in part due to the information asymmetries which render consumers vulnerable to exploitation by suppliers. Unsafe food also exposes consumers to health risks, besides denting consumer confidence, which in turn undermines markets and breaks down the food supply system. The lessons learnt from flawed initial regulation of the tobacco industry are still vivid, in the same way that the effects fact foods industry on the health of consumers must not be taken lightly. Government regulation is indispensable to ensure consumer protection, market efficiency and promotion of the common national good. Governments are better placed to perform the regulatory role because of the large amounts of resources and machinery in its disposal, which makes certain that its intervention is both effective and efficient.
References
American Diabetes Association. (2012). Standards of Medical Care in Diabetes—2012. Diabetes Care vol. 35 no. Supplement 1, S11-S63.
Food and Agriculture Organization. (2005). Assuring Food Safety and QualityL Guidelines for Strengthening Food Control Systems. Rome: FAO.
MarketLine. (2013). Coca Cola Bottling Co, Consolidated. New York: MarketLine.
Stephens, B. P. (2014, May 19). Food should be regulated like tobacco, say campaigners. Retrieved Oct 20, 2014, from http://www.bbc.com/news/health-27446958
United Nations Department of Economic and Social Affairs. (2003). UNited Nations Guidelines for Consumer Protection. New York: United Nations Department of Economic and Social Affairs.
US Food and Drug Administration. (2012, Nov 7). Food Safety and Consumer Confidence in the Global Food System. Retrieved Oct 20, 2014, from http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm326870.htm
Yip, G., & Hult, T. (2012). Total Global Strategy. New York: Pearson Education.
