As the Great Horsemeat Crisis continues to spread—“gallops” is the verb favored by the European press—across the continent, and countries pile on to blame Romania (France, Holland, Cyprus, etc.), what is becoming increasingly clear is that old-fashioned corporate greed, aided and abetted by politicians eager to gut “costly” regulations and industrial inspection regimes is behind the scandal.
In a sense it is fitting that the whole imbroglio began in Ireland, where inspectors in Ulster first indentified that hamburgers should have more properly been labeled “horsewiches.” The Emerald Isle has more horses than any country in Europe, and, according to the Financial Times, in 2007 Ireland produced 12,633 thoroughbred foals and has some 110,000 “sport” horses.
The year 2007 was just before the Irish real estate bubble imploded, bankrupting the nation and impoverishing millions. And the year the “Celtic Tiger” died was very bad news for horses. Thousands of the creatures were simply turned loose by their financially strapped owners, and the number of horses sent to slaughterhouses jumped from 2,000 in 2008 to 25,000 in 2012.
The Irish-horse connection goes back to when Celtic speaking people first burst out of Central Europe during the second century B.C. Celtic cavalry and chariots—the Celts introduced the latter to Europe—were pretty formidable, as the Romans discovered on a number of occasions.
Horses have always been a high status item in Ireland, and during the colonial period the English figured out a devilishly clever way to take advantage of that. According to the Irish Penal Laws of 1692, no Catholic—the vast majority of native Irish were Roman Catholics—could own a horse worth more than five pounds. So the English would go into the countryside, select a thoroughbred, and force the breeder to sell them his horse for a pittance. Sometimes the “buyers” would then turn right around and re-sell the animal to its former owner for hundreds of pounds.
When the Irish first discovered horsemeat in the food chain, they claimed innocence and blamed the Poles. It turns out, however, that a small slaughterhouse in Tipperary was shipping horsemeat labeled as beef to the Czech Republic. The British blamed the Romanians, and Rupert Murdoch’s newspaper, The Sun, took the opportunity to indulge in his favorite sport: ethnic bashing. A “grim Romanian slaughterhouse built with EU (European Union) cash” was the culprit, blared the largest (and sleaziest) tabloid in England.
The Romanians did indeed use EU cash to build a plant, but the slaughterhouse produced records showing that they had correctly identified the meat as horse. Romanian Prime Minister Victor Ponta complained that Romania was routinely made the EU’s scapegoat.
Then the Swedes got into the act and blamed France, and it does appear it was the French company Spanghero that slipped “old Dobbin” into the food chain. Spanghero denied the charge and, in its defense, trotted out yet another animal: a weeping crocodile. “My first thought is for the employees,” said a choked up Laurent Spanghero at a press conference. “My second thought goes to our kids and grandkids that carry our name. We have always taught them the values of courage and loyalty and today we have been plunged into dishonor.”
Except, according to French Consumer Affairs Minister Benoit Hamon, Spanghero could hardly have failed to notice that the meat it was importing from Romania was much cheaper than what the company normally paid for beef. A kilo of horsemeat costs .66 cents, a kilo of beef, $3.95. According to Hamon, Spanghero made $733,800 substituting horsemeat for beef.
Then things got really murky.
The Netherlands said the Cyprus-based meat vendor Draap that sold the meat to Spanghold was responsible, and the company’s track record would suggest the Dutch had a point. In 2012 Draap was convicted of selling South American horsemeat labeled at German and Dutch beef.
But it turns out Draap—based in Cyprus but run by a trust in the British Virgin Islands—is owned by the company Guardstand, that in turn owns part of the arms dealing company, Ilex Ventures. According to prosecutors in New York, convicted international arms dealer Viktor Bout owns Ilex Ventures. Guardstand’s sole shareholder, reports Jamie Doward of The Observer, is Trident Trust, which sets up companies in tax-free nations. Guardstand helped set up Ilex.
Sorting this out will be nigh on impossible, because tax havens like Cyprus and the British Virgin Islands are not about to give up their secrets, and the powerful corporations that shelter their ill-gotten gains there know how to keep inspectors at bay.
Hypocrisy has been in abundance during the Great Horsemeat Crisis.
Owen Paterson, the British environmental secretary who oversees food safety and a member of the Conservative Party, thundered in Parliament about an “international conspiracy.” However, the current Conservative-Liberal government has instituted cutbacks on inspections by the Food Standards Agency (FSA), and turned enforcement over to some 330 local authorities.
“It is a shame that testing by the FSA has been reduced,” Dr. Chris Smart told the Guardian. “I am sure there will be other crises that come along in the next few years.” And given that UK food prices have risen nearly 26 percent that will surely be the case. Inspectors have already uncovered adulterated olive oil and paprika made from roof tiles.
At the heart of this are the continent-wide austerity programs that have driven up the ranks of the poor, requiring low-income families to rely on cheap meat or go without. “Why was horsemeat present in beef burgers?” asks Elizabeth Dowler, a professor of food and social policy at Warwick University, “Because the price has to be kept as low as possible.” Horsemeat is one-fifth the price of beef, so the temptation is to either adulterate beef with horse, or sell it as cheap beef. “This has the most impact on those with low income and large numbers of children,” says Dowler. “People in this situation have no money to buy better quality burgers, or to go to a butcher and make their own mincemeat. Instead they depend on special 3-for-2 offers. The problem is linked to poverty.”
Horsemeat for some, beer and skittles for the likes of Spanghero.
But the real culprits in this crisis are the banks in Britain, Ireland, Germany, the Netherlands, and Spain that ignited the economic crisis by artificially pumping up real estate bubbles. Up there in the docket with the bankers should be the politicians who shoved through development schemes, waved environmental regulations, and turned a blind eye to speculation. And when everything crashed, the taxpayers—the vast majority of whom never got in on the boom years—got stuck with the bill.
Poor Ireland. The EU enforced austerity scheme has raised the unemployment level to above 15 percent—30 percent for young people—and saddled homeowners with onerous tax and fee hikes. Wages have been cut, health care fees raised more, and welfare butchered. In spite of these “reforms,” the economy grew an anemic 0.9 percent in 2012, and is scheduled to rise to 1.5 percent in 2013, down from the 2.2 the government originally predicted.
And the Irish economy is actually much worse than the figures indicate, because much of the wealth Ireland currently creates goes into the coffers of huge multinationals attracted to the island’s 12.5 percent corporate tax rate, the lowest in Europe. As the Economist points out, “The Irish people have fared much worse than the Irish economy.”
And the pain for the average Irish working person is due to get worse. The 2013 budget will cut spending $4.6 billion, increase taxes, and add yet more austerity in 2014 and 2015. All of this woe has drawn widespread praise from the EU and the International Monetary Fund, which suggests that if a bank praises you, it is time to reach for a barricade.
This is not just a European problem, because the trend toward cutting back on regulations and inspections is worldwide. For instance, under pressure from the agricultural lobby, the U.S. Food and Drug Administration has backed off trying to reduce the amount of antibiotics used on livestock. According to a recent report by the National Antimicrobial Resistance Monitoring System, 80 percent of all the antibiotics manufactured in the U.S. are used on animals. The result is that antibiotic-resistant salmonella is spreading rapidly in chicken and turkey populations, and turning up in hospitals, clinics and gymnasiums.
Horsemeat is going to be the least of our problems.
Conn Hallinan can be read at dispatchesfromtheedgeblog.wordpress.com and middleempireseries.wordpress.com
http://www.counterpunch.org/2013/02/25/the-great-horsemeat-crisis/
What horse meat and the banking crisis have in common
Over the last couple of weeks there’s been an unfolding food scandal in Britain and Europe after various ‘beef’ microwave meals and burgers were found to contain horse meat. It’s prompted a whole lot of debate about supply chains, the ethics of cheap meat, and the cultural taboos of eating (or not eating) horse. But it’s made me think about something else entirely – the banking crisis. The horse meat scandal and the financial crisis may look very different, but they share the same roots.
1. Corporations – publicly traded corporations are duty bound to maximise ‘shareholder value’, ie deliver the biggest possible return for investors. As a supermarket, you can increase profits by expanding, but also by paring costs and using your buying power to secure low prices from suppliers. The suppliers are all bidding for a slice of the supermarket action by also offering the cheapest prices they possibly can. It’s a race to the bottom – who can supply the absolute cheapest hamburger patty or microwave lasagna? If companies are incentivised to push their prices as low as possible, it’s hardly surprising that some start cutting corners.
In the banking crisis, we’re just talking about loans rather than meat. One bank offers a mortgage with no deposit, another trumps them with the 125% mortgage. Borrowing over the phone or the internet? Sure. Loans with no credit check? Okay then. The race to the bottom applies here too, a gush of easy credit to consumers and home owners, all growing the banks in the name of the shareholders. Like the supermarkets pushing one step too far in the search for cheap meat, so the banks pushed their lending beyond what could be repaid – because in the short term at least, it was profitable to do so.
2. Inadequate regulation – the second factor that the two scandals have in common is a regulator not being able to keep up with the market. Britain’s Trading Standards Agency and the Food Standards Agency have both got their investigations underway, but as the BBC’s Now Show put it, this is ‘closing the stable door after the horse has been bolted’. Policing every product on every shelf in the country is a mammoth task, as food networks are global and products are often ‘of more than one country’ as the labels put it. To make matters worse, these are times of austerity and budgets have been cut at organisations such as the Food Standards Agency. They are dismissed as quangos and red tape until the scandal happens, and then everyone wishes they were bigger and more powerful.
In banking, the regulator had similarly failed to keep pace with changes in how banking was done, how derivatives were constructed, and how banks were doing their accounting. When they did find irregularities, they often lacked the power to do anything. If they were given more power, it would have been seen as meddling, and making Britain uncompetitive.
3. Complexity – The third factor is the sheer complexity of our food systems in a global culture. When the horse meat was first detected, the race was on to track it back through the chain. Which factory produced the ready meals, who processed the meat, which abbatoir supplied it? Somewhere down the line a crime has occurred, but it’s very hard to know where. That raises the uncomfortable fact that much of the time, we just don’t know where our food comes from. We have to be content to say ‘it came from Tesco’ and hope for the best.
There was a similar phenomenon at work in the financial crisis, through mortgage backed securities. Mortgages were bundled up, sold on in tranches according to risk, and used to underpin a variety of derivatives. The credit rating agencies kept giving them triple A status, but as we now know, there was a great big slice of subprime lending in the mix that nobody knew was there. Bad lending practice in one country’s property boom could infect pensions and public accounts in another, tipping whole economies into uncertainty.
Food adulteration and banking crises aren’t the only symptoms of this combination of corporate rent-seeking, sleeping watchdogs and global complexity. You could probably make the same comments about the use of sweatshop labour in the fashion and electronics industry.
What can be done about it? There are different answers for each of those three aspects of the problem. There are other ways to set up companies that would neuter the corporate drive for profits above all else. Structures include employee ownership, cooperatives, B-Corps, and non-profits – here’s a list of ten alternative businesses.
On the regulation side, there’s a balance to strike. The last decade or so has seen a preference for ‘light touch’ supervision of corporate behaviour, and that hasn’t really worked very well. Better oversight doesn’t have to mean big government though. Some industries in Britain are self-regulated, using codes of conduct, shared standards, kitemarks and so on. Others are co-regulated, using industry bodies in partnership with a government organisation. Sometimes this works fine, like the Advertising Standards Agency. Sometimes it fails, like the Press Complaints Commission and the phone hacking scandal. Other sectors, particularly important ones like energy or education, have entirely government backed regulators. There is no one-size fits all solution.
However, the supermarkets have been a problem for a some time. Successive governments have looked into their behaviour and then failed to act, or have opted for voluntary codes of conduct that haven’t been respected. The government did appoint a long-expected ‘supermarket ombudsman‘ this year though, which is one hopeful sign.
As for complexity, you don’t have to go far to find arguments in favour of a more localised food network. Likewise with banks, there are distinct advantages to regional or local banks and some countries (like Germany or the US) still have them. There is a trade-off though. The reason companies source internationally is to secure low prices, and many things would be more expensive sourced locally.
Ultimately, that brings us into the equation too. If we didn’t buy cheap meat and take out easy loans, the companies wouldn’t be there to supply them. We can’t separate ourselves from the issue and blame the big corporations. Once again, we’re challenged to ask more questions about what we really need, and what makes life worthwhile. There is no simple fix for these sorts of things, it’s a matter of culture.
http://makewealthhistory.org/2013/02/20/what-horse-meat-and-the-banking-crisis-have-in-common/