Saturday, February 10, 2018

Cheaper food to help the poor? Think again

One of the few places where the Cato Institute and I agree! Cheaper food creates problems with obesity. Cheaper fuel exacerbates problems with pollution. Some great paragraphs from the Economist:

Whereas greener countries slap hefty taxes on petrol and diesel, Egypt does the opposite. Motorists pay only 59% of what it costs to fill their cars. Since driving is cheap, more people do it, aggravating congestion and making urban air eye-wateringly foul. The World Bank estimates that traffic jams in Cairo alone cost Egypt 3.6% of GDP. Egyptian cities are the fifth dirtiest in the world, says the World Health Organisation. And since the truly poor cannot afford cars, most petrol subsidies are captured by the better-off. The top 20% of urbanites receive eight times as much as the bottom fifth.

Similarly, bread subsidies are a waste of dough. Egyptians buy up to five loaves a day for a tenth of their cost. The state also subsidises sugar, cooking oil and other calorific staples. This is one reason why Egypt has one of the world’s highest rates of adult obesity. And despite the introduction of smart cards to limit how much subsidised food an individual can take, the subsidies are often stolen.

[I]if all food and energy subsidies were stopped and half of the savings used to pay for cash transfers to the poorest 60% of households, each of those households would receive $622 a year, more than doubling incomes for the bottom 25%.

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