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PORTSIDE CULTURE

IF YOU THINK GROCERY PRICES TAKE A BIG BITE OUT OF YOUR PAYCHECK IN
THE US, CHECK OUT THE REST OF THE WORLD  
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Peter A. Coclanis

The Conversation
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_ Grocery prices are still up from prepandemic numbers in the U.S.
but— relatively speaking — they are the cheapest in the world. _

At what price? , jeannetteferrary.photoshelter.com

 

Though cynics may question her motives
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Kamala Harris’ recent call to ban price gouging on groceries
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received a lot of attention – and for good reason.

The cost of food has been a big concern for Americans since the height
of the COVID-19 pandemic, with U.S. food prices rising 25%
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2019 and 2023. While U.S. food inflation slowed considerably
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2024, grocery prices are still up from prepandemic numbers.

Price hikes like this are as painful as they are aggravating, and they
can have real effects on both household spending and the broader
economy. So it’s not surprising that the topic is coming up on the
campaign trail.

But oftentimes, complexity can get lost amid the politicking. Here,
economic history – and economic historians
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– can provide some context.

HOW AMERICANS SPEND THEIR FOOD DOLLARS

For starters, despite the run-up in food prices in the
U.S., there’s little evidence
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price gouging in the grocery industry today. 

“Price gouging” is notoriously difficult to define, but the term
is usually invoked after a supply or demand shock of some kind, when
sellers are said to take advantage and jack up prices, particularly
for basics such as food or gasoline. Concern over “gouging” goes
way back – in some ways, it can be seen as an outgrowth of medieval
Christian injunctions against mercantile greed
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Although many states have laws on the books
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price gouging, such laws have proved difficult to enforce. In the case
of the U.S. grocery industry, profit margins — traditionally
razor-thin at about 1% or 2% — remain small even today.

What’s more, it’s important to note that food prices in the U.S.
— relatively speaking — are the cheapest in the world, and have
been for a long time. This is the case whether measured in terms of
disposable personal income or in terms of percentage of household
expenditures.

For example, U.S. Department of Agriculture data shows that in 2023
— the most recent year for which data are available — Americans
spent about 11.2% of their disposable personal income
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or income after taxes – on food. That was unchanged from 2022.

This includes expenditures for both food at home — generally
purchased at supermarkets and other grocery stores — and food
purchased “away” at restaurants and the like. Interestingly, the
“away” component has been growing as a proportion of total food
spending since the onset of COVID-19.

GROCERY PRICES AROUND THE WORLD

No one likes to pay more for food, but a little comparative data can
reduce one’s sense of victimization, if not alleviate the pocketbook
pain.

Cross-national data compiled by the USDA shows that in 2022,
Americans spent less on food
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a proportion of total consumer expenditures than people in any other
country. People in many other nations spent two, three or four times
as much in percentage terms, and sometimes even more.

The differences were greatest between the U.S. and low-income
countries in South Asia and Africa – Bangladesh, Myanmar and
Ethiopia, for example – but were also quite sizable between the U.S.
and middle-income countries such as Argentina, Brazil, China, Costa
Rica and Mexico.

These differences aren’t altogether surprising. Why not? Because as
the German statistician Ernst Engel first noted in the middle of the
19th century, as family or household income increases, the proportion
of the total spent on food declines
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After all, you can only eat so much no matter how rich you are.

Scholars have found that Engel’s insight still applies in the
contemporary world
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which provides context for the sharp distinctions between low-income
and middle-income countries and the U.S.

That said, however, there are big differences between the U.S. and
other high-income countries such as Japan, Sweden, Norway, France and
Italy, with the U.S. percentage spent on food considerably lower
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in any of these other
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countries
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This is because economies of scale are more important in American
agriculture, among other reasons.

To be sure, if so inclined, one can point to certain negative
environmental externalities in American food production and question
the ways animals and laborers are treated in the American food system,
which prizes efficiency — or at least low prices — above all else.

But food that is dirt cheap in comparative terms, even in a time of
rising food prices, is a problem virtually every other nation in the
world would love to have.

KEEP UP WITH THE GLOBAL ECONOMY

Inflation, interest rates, trade conflicts and the growing global scam
economy all have impacts on business we need to be aware of. This is
why I co-write a weekly business and economy email newsletter. It
brings a curated summary of the week's briefings from academic experts
around the world straight to your inbox. And it's free.

* Food Prices; Grocery Chains; Food Justice;
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