Some people deserve horsemeat

The horsemeat scandal was all over the press at the weekend. You can’t have missed it…

I’m bringing it up today because I think this scandal is related to couple of things we’ve been discussing here at The Right Side recently. First, inflation.

Horsemeat is what you get when inflation stokes up input costs. In this case, trying to beat inflation led the producers one step too far.

Second, it shows just how wary you should be about labels – be it of financial products, food or anything else. Don’t be fooled into thinking that government regulations will keep you safe. More likely, they’ll have the opposite effect – by making you complacent…

Outrunning inflation with horses

In light of price inflation, the supermarkets have been pushing suppliers to keep costs down. The public can’t afford higher prices, so the supermarkets are desperate to keep commodity price inflation from leaking out into the real world.

Last week, I mentioned how the reported inflation figure is suppressed by a fix called ‘substitution’. As I said then – if the price of beef goes up, the statisticians say “hey, people will substitute beef for something else… so let’s not increase the inflation index to reflect the full rise in beef prices.”

But I have to admit, I didn’t think that substitution would have been made by the producers without the public’s knowledge… “let them eat horse!”

I guess in many ways, it shows the ingenuity of a free-market economy and how, left to its own devices, it finds the most cost effective means of production. But then again, it also highlights a major flaw with the system.

Somebody, if not several parties, has clearly been cheating. And this is something most of us are too naive about. Because this level of corruption and cheating is more widespread than many think.

Regulation leads to complacency

In the UK, there’s a general assumption of fair play. It’s a great way to live your life – one shouldn’t be too cynical. But for many, government regulation gives a false sense of security. And I’m talking about in many areas of our lives. Health, food and of course financial sectors are all highly regulated. But the public over-relies on regulation. We’re assured that regulation means we can trust what the labels tell us.

But we only need to look at the City to see how things have changed. “My word is my bond” made the City of London a prominent centre of finance. Now, trust has been outsourced to government regulators. And we’ve seen where that got us. It’s a subtle change but it’s so important for the country.

The City has always had its scammers and cheats. But because there was little regulation, people had to do their homework, and only deal with trusted individuals. It was self-regulation, and it worked.

Because if somebody is intent on cheating, they will. Countless scams have robbed innocent savers over the years. Yet regulation is becoming a bigger and bigger business, and ultimately we all pay the price through higher fees and commissions. And yet the cheats always seem to find a way round it. What a waste!

What do you expect for 99p…

But the biggest problem with regulation is that it fosters complacency and erodes personal responsibility.

Would so many have deposited money with Icelandic banks if they thought they wouldn’t get their money back in the event of a bust?

It’s the same with the food industry. Because of regulations and controls, we’re led to believe that everything we read on a label must be so. How many people ever stop to think about what it takes for a business to produce a 99p lasagne? 

Sometimes it’s useful to just stand back and reflect for a while. Forget about what’s on the label and certainly forget about what government says. Because to survive in this environment, you need to be able to think for yourself and read between the lines.

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31 Responses

  1. 11/02/2013, Michael wrote

    Not quite with you this time Bengt. “Forget about what’s on the label”?? Will that really help? I don’t like the title of this piece either. Best wishes anyway.

  2. 11/02/2013, AD wrote

    Bengt, I could not agree with you more. We have been living through a time of great prosperity & relative ease. Politicians get voted in by sustaining the unsustainable. People need to wake up and realise that the environment has changed and is continuing to change DAILY for the worse. People need to wake up to this fact and take responsibility for their own lives. Your excellent example extends throughout the economy and all different facets of public & private life. Great example!

  3. 11/02/2013, Critic Al Rick wrote

    The scandal is not so much the horsemeat as it is the hypocrisy.

    We could produce a lot more meat and meat products here, in the UK. The fact that we don’t is but one instance of very many bearing witness to the uncoordinated governance of the UK, and many other Western countries. More of this later.

    To the Supermarkets the best, pro rata or perceived pro rata, is the cheapest. And if the cheapest be from abroad, regardless of whether it be effectively subsidised surplus, or produced in conditions that would be outlawed in the UK, or not obviously something other than it is supposed to be, then as far as the Supermarkets are concerned it is the best.

    And to hell with home producers with increased overheads to comply with a plethora of rules and regulations, some ridiculous by their self-defeating nature, to placate the animal welfare lobby, etc.

    cont…

  4. 11/02/2013, MARTIN PETER SAMUEL wrote

    Bengt

    Sorry – a bit simplistic this time.

    What do you recommend – I go out and buy a DNA testing Kit for the meat?

    Price is no guarantee of quality alone. Set the price too low and many will avoid it as they smell a rat. Now that is an interesting thought. Should I be testing for rat DNA in the next purchase of lasagne from the supermarket or beef from the butcher.

    It is the market that concentrates buying power in the hands of super markets and contributes to the cost squeeze on primary producers. Perhaps their political muscle may also account for some of the alleged whitewash reports following Industry enquiries.

    Personally I buy from a range of retailers but what good is that if the majority go to the Big Four and small retailers are put out of business.

  5. 11/02/2013, Critic Al Rick wrote

    e regardless of whether or not it is at a price lower than you can produce it for.

    Do as I say (produce by the rules) not as I do (purchase from those that do not produce by said rules).

    This sort of carry-on has been ongoing since we joined the Common Market. And is not restricted to the food industry. And is a contributory factor to the increasing absolute Balance of Payments Deficit and to the increasing absolute unemployment figure.

    Is this totally the result of incompetence (Shoot-Yourself- in -the- Foot Britain) or partially the result of a contrived and systematic effort (Globalisation for the benefit of and on behalf of TPTB)?

    Who is the bigger hypocrite – the masses or TPTB?

  6. 11/02/2013, Lupulco wrote

    3. Critic Al Rick
    Spot on.
    1] What would the French do?
    2] If it does not comply with the UK regs, either don’t import it. Using HSE as a smokescreen, or send in our vets to check that it does comply at the Supermarkets [our] expense.
    Remember when the EU banned our Meat due to BSE/Foot and Mouth etc.

  7. 11/02/2013, 4caster wrote

    No, Bengt. You write: “Horsemeat is what you get when inflation stokes up input costs. In this case, trying to beat inflation led the producers one step too far”. But that flies in the face of the facts. Producers’ biggest cost is for labour, but wages are declining in real terms and as a proportion of total national incomes. Profits are increasing in real terms and as a proportion of total incomes, implying that producers have other costs well under control. My conclusion is that companies are not satisfied by merely making a modest but honest profit. Sheer greed propels them to try to make additional dishonest gains.

  8. 11/02/2013, Critic Al Rick wrote

    @ Lapulco

    I remember as if it were yesterday. And the concurrent to BSE salmonella in eggs farce. I also remember asking “where does the UK get its apparent wealth from? From the International Finance Sector in London”, I was told. This was about quarter of a century ago. We learnt how good that was in 2007/8.

    I also remember the ONLY time after joining the so-called Common Market that egg production was decently profitable in the UK was during a few months whilst our Govt banned imports of eggs from countries which weren’t vaccinating layers against Newcastle Disease (Fowl Pest).

  9. 11/02/2013, 4caster wrote

    Your conclusion that we should not “be fooled into thinking that government regulations will keep you safe” begs the question: whom should we trust?
    The BSE crisis, which wrecked Britain’s beef industry for years, was not caused by too much regulation. It was caused by farmers feeding cow bonemeal and other bovine waste products to cows because there was no law to prevent them from doing that. Likewise Eggwina Currie’s salmonella-riddled egg industry was caused by poultry farmers feeding chicken heads and chicken manure to chickens, because there was no law against it.
    Regrettably the solution is regulation, more Regulation and YET MORE REGULATION. And it needs to be rigorously enforced through imprisonment of individuals who direct law-breaking companies. I have always believed in the mixed economy, but like many people I am rapidly losing confidence in corporate governance.

  10. 11/02/2013, Critic Al Rick wrote

    @ 4caster

    If only you knew. It’s a fight for survival when you’re at the mercy of Supermarkets.

  11. 11/02/2013, Critic Al Rick wrote

    @ 4caster

    You’re right enough about BSE but way off the mark with salmonella.

    The salmonella in eggs farce was a witch hunt aimed at destroying a very efficient (perceived cruel) system of egg production. They’ve succeeded but replaced it with systems both inefficient and cruel.

    But then that’s the trend – self-perpetuating self-destruction largely initiated by commonsense morons.

  12. 11/02/2013, bengt wrote

    4 caster

    I can’t agree that this all needs ‘regulation – and more… and more ad infinitum’.

    The tort of negligence has long since been established. I seem to remember a snail in a bottle of ginger beer (it was a long time ago since I studied law).

    If individuals take short cuts, then they must be accountable for the ramifications of their actions. Precendent law is more than good enough. And unlike regulations, it puts in place a much better system whereby ‘best-practice’ must be engendered…. else risk losing your whole business… and mabye imprisonment!
    Again, it places the onus of responsibility on the individual – in this case the producer.

    Bengt

  13. 11/02/2013, 4caster wrote

    use.
    How can a newcomer to investment or financer know who these trusted individuals are? Trust the grapevine? Was there no fraud when “my word (was) my bond”?
    The law enforcement agencies can be severe when they want to. I recall a youth who reached through an already smashed shop window during the 2011 London riots, to take a bottle of water because he was thirsty. He received a prison sentence. Yet the billion pound thieves and fraudsters in the world of banking and finance rarely get sent to prison. The few that are jailed ensure that their ill-gotten gains are secure in some untraceable part of the world.

  14. 11/02/2013, 4caster wrote

    Yes Bengt, perhaps not more regulation ad infinitum, but effective enforcement of the existing law, and filling gaps in it, would help enormously.

  15. 12/02/2013, Peter Cape wrote

    Horse became so cheap the cost grounds for including it became ozone. Why so cheap? Very large numbers of the wealthy list so much in the financial crisis they could no longer afford to keep their racing horses.
    By the same argument, look for dog. Greyhounds.

  16. 12/02/2013, Banker wrote

    I disagree with ths writing and do not think it is helpfu at all. Like some people mentioned – price is no gurantee of quality. Inflation might make life difficut for manufacturers and this might encourage fraud – well true perhaps. But given the oppotunity to enrich at least some manufactirers would engage in such practices regardess of prices and inflation. Also supermarket seem to be blamed. Years ago when there were no supermarkets and farmers were selling their produce directly and sufring higher animal mortality due to disease natural-causes-dead lifestock regularly entered foodchain. The answer is stricter laws and very strict penalties including asset confisaction and lenghthy prison terms – perhaps even whole life.

  17. 12/02/2013, bengt wrote

    Banker,

    Of course, you’re right that pricing is no guarantee of anything. But you can’t get away from the fact that this horsemeat is turning up in low-grade and ‘value’ items.

    Cheap-end supermarkets have grown substantially during these recessionary years – as have the ‘value’ ranges at the major supermarkets. Many customers can’t afford higher end stuff.

    And I totally agree that anyone providing mis-labelled, or dangerous products must be dealt with by the strong arm of the law. I just think that far too often producers can say “Well, it complied with reg’s” as a get out card for bad practice. There’s no personal responsibility in this situation.

    Bengt

  18. 12/02/2013, Nick Fury wrote

    Spot on Critic Al Rick, I’m in full agreement.
    The laws and regulations are already there in most cases, just not adhered to or exercised, same with the banking scandals; the laws are there but nobody seems to be getting locked-up, hence no fear of the crimes…if discovered, we’re probably only seeing the tip of the ice berg, so far.
    I heard a joke recently that made me chuckle; The supermarkets have decided to now accept HMV vouchers – otherwise known as Horse Meat Vouchers!

  19. 12/02/2013, Damian wrote

    There is a very relevant broader point made here which is about consumers taking accountability for their buying actions.

    20 value sausages for 99p? Go figure what’s in it. I have worked in the food industry all my life and know how much of that 80p ex VAT is for packaging, supply chain, marketing, overheads, profit…There’s not much left for actual food.

    Yes, it’s true that incomes are squeezed but that’s too easy a let-off. We spend less of our income on food than at any time in our history and, to put it bluntly, until the man in the street chooses to spend less on his flatscreen telly, fags or Sky subscription and more on high quality food, he’s going go keep getting confronted with such scandals.

    Regulation up to a point is needed, but consumers need to start recognising that they are ultimately accountable for poor quality food, by refusing to pay extra for decent products.

    You get what you deserve. As with governments, as with food.

  20. 12/02/2013, Lucius wrote

    I’m bewildered, contaminated by horsemeat ? personally I’m sure horsemeat is greatly preferable to the other rubbish they put in these things, the labelling should of course be correct. If only I could buy some of those withdrawn products at a reduced price – I’d fill my freezer. Why do we not get the choice (free market style), if horse meat is cheaper – use it and say so on the label.

  21. 12/02/2013, jimtaylor wrote

    l to humans and therefore make the meat unfit for human consumption.

    Because the horsemeat entered the food chain illegally and without tracability, nobody knows whether it is fit or unfit for human consumption.

  22. 12/02/2013, aff wrote

    Good article. I’ve been saying this too that the horse meat is a sign of inflation. Plenty of other ways inflation will show up to try and mask price inflation, inferior ingredients, smaller sizes for the same price, etc. Govt stats are a blantent lie, i was shocked buying groceries this evening.

    It sounds unkind but I agree that people need to wake up and take some bloody responsibility for themselves instead of expecting the state to sort everything out all the time. We are drowning in bloated beaurocracy and a huge sprawling, growing state, drip feeding a willing bloated lazy ignorant mass of people.

    And the person that said we need more regulations!!! I couldn’t disagree more. Regulations are only ever designed for one thing. To oppress fair competition.

  23. 13/02/2013, Pete C wrote

    As someone who works in financial services I know only too well that “Authorised and Regulated by the FSA” means little. Of the many penalty decision notices I’ve read, in the overwhelming majority of the major fines it was pretty obvious the firm itself picked up the issue and ‘fessed up to the FSA. While the FSA did a pretty good job of grandstanding and throwing big words and bigger fines after the event, there was little evidence its supervision teams ever uncovered any wrongdoings they hadn’t already been alerted to. Would not therefore rely on regulators to uncover malpractice, let alone prevent it. Take responsibility, research carefully and use your common sense – if it seems too good to be true it probably is!

  24. 13/02/2013, Luke wrote

    Surely, complying to more and more regulation just adds to costs, thus driving the need to source cheaper raw materials – such as illicit horsemeat. And who is going to pay the regulators? Higher taxes, anyone?

    It is easy to enter into an agreement and then blame someone else when it all goes wrong. If you don’t understand it or can’t be bothered to do your homework, don’t sign up to it – whether it is buying cheap frozen meals or entering into a interest rate swap.

    And more specifically with regards to food, how come everyone has plenty of time to waste on the internet, social networks, playing on their phone etc but is somehow too busy to cook food from scratch? (and then look for someone to blame who will pay for their gastric band …)

  25. 13/02/2013, aff wrote

    The CFTC who are supposed to regulate the commodities are a fine example of how regulation doesn’t work to protect the people that really need it. It only protects the state and other corporate fat cats.

  26. 14/02/2013, Nick Fury wrote

    I agree people should wake-up and take more care/responsibility for themselves, but other than using the officially required labels to make an informed decision, you can’t do much else, we are not all food technicians and you’d be surprised what’s in some food and not just the value goods; price is not a guarantee of quality – but again low income families still should not have to put up with illegal, contaminated and possibly dangerous foodstuffs. When you think about it seriously bits of any dead animals in food is quite gross really; not many of us would slaughter & butcher a cow or pig, let alone a horse, lamb or baby deer would we? i think if I did I’d need councelling after…actually thinking about it, maybe I should be a vegetarian!

  27. 15/02/2013, Mark Paterson wrote

    Meat is Meat. The only difference here is what is In it ? Buetazolodine etc.Meaning if you eat beef you can eat horse. Is there a table name for horse meat ?

  28. 15/02/2013, Boris MacDonut wrote

    Just saw Warhorse on the telly. I reckon it may be a Warburger by now.

  29. 15/02/2013, Colin Selig-Smith wrote

    Bengt you have been found out. The Keynesians were spot on. Hedonics in action! People simply substitute one product for a cheaper one therefore there is no inflation. And clearly what the food industry needs to make it safer and more efficient as has been pointed out is more bureaucracy, pile it up on them, dozens of forms filled out in triplicate, by hand, no printers allowed. That’ll make sure that everything is above board and ship shape.

    In reality totally with you Bengt, I made an almost word for word similar comments to friends and family about the horse meat. And as for more regulation, why is it that people insist that massively more of something that hasn’t worked in the past will suddenly work in the future?

    In the meantime I’m going vegetarian.

  30. 16/02/2013, 4caster wrote

    #27 Mark Paterson, the name is Basashi. when served raw in Japan. In French, and in pseudo-Feench restaurants, it’s Steak de Cheval. I once ate some in Paris, and found it tender and tasty. But what we’re being fed in burgers and mince will be far removed from steak!

  31. 17/02/2013, Boris MacDonut wrote

    #30 4caster. We are not “being fed” anything. We have the choice not to buy. The problem is the misdescription on the labels. Much harder for the luvvies at the ad’ agency to think up a winning byline for a dead horse on a plate. Mmmm lovely tasty Dobbin fresh from the Knacker’s yard.

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