How Supermarkets Can End Poverty
Lee on Aug 01 2008 | Filed under: Developmental economics, Economics, Foreign affairs, Lee's Page
Namibian supermarket selection (photo: Olivier Peyre)
One of great inequities in the modern world is that in relative terms, food in poor and starving countries often costs far more than in the wealthy developed world. That’s because industrial countries tend to be dominated by large supermarket chains, which can achieve enormous economies of scale in volume sales, and thus are able to offer dramatically cheaper food prices to consumers.
The difference between the benefits of traditional and supermarket retail food sales can be staggering even within the same country. In an unevenly developed country such as India, which is divided between urban chain supermarkets and rural traditional markets, the cost of vegetables is 33% cheaper in the city than for the rural poor dependent on small local stores.
This has larger economic implications than is generally acknowledged, as food purchases consume a far larger share of national wealth in the developing world. In poor countries such as Nepal, food spending can account for as much as 50% of consumption expenditure in middle income households, compared to 15% in the United States. Thereby a cruel kind of trap is created through high food prices, which precludes consumer spending on goods and services that command higher wages than agriculture can provide.
Thus, if you were able somehow to reduce the cost of food in the developing world, and thereby the share of consumer income it eats, you could free up large reservoirs of capital to the benefit of the broader economy’s development.
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