Lies, Corruption and Deception in the Global Village (July 3, 2007)
Many of our correspondents are exceptionally well-informed and experienced. One such is J.B. who had these observations on the reliabiliy of financial data from overseas firms. J.B. was responding to an entry here on tainted/defective imports from Asia; his comments reveal that all the various shades of lying--omissions, claims of ignorance, deceptions, corruption, etc.--are not limited to foodstuffs but are endemic to the world of finance as well.
You know whenever I see a company run by anyone outside of Germans, English, Scandanavians, Canadians and English, you know I do not believe a word they say (not that the above group is exempted but let us say the degree is not quite as severe).But isn't the entire "emerging markets miracle" of skyrocketing stock prices based on the financials of these overseas companies? What can we make of the "miracle" if the numbers are untrustworthy? By that I mean, would the financial reports of these emerging-markets high-flyers withstand a fair and honest audit performed according to the accounting standards which regulate U.S. public companies' reports?
My own reading on the subject suggests that privately, nobody with any experience in the field would stake their career or money on the reliability of most overseas companies' financials. It's just one of many "dirty little secrets" that's tolerated in order to make as much money as possible in the least amount of time, i.e. before the entire rotten structure blows up/collapses.
Moving back to food, it is worth recalling that abysmally unhealthy food processing was rampant about a century ago in the U.S. Upton Sinclair's 1906 expose, The Jungle , tore the lid off the lies and deceptive practices, and an outraged public demanded safety regulations and enforcement. (The two are not identical; you can have all the regulations in the world but if they're not enforced in a non-corrupt fashion, they are meaningless.)
Let's check back in on the latest wave of findings regarding food imports from China:
Firms increase scrutiny of Chinese ingredients: As imports climb, companies trying to head off problems
In other words: since the governments of China and the U.S. have both failed U.S. consumers, U.S. companies are finally wakig up that it's their responsibility to vouchsafe for the safety of their products.
U.S. Detains Farmed Seafood From China.
But it's all safe now. Right.
Chinese fish import ban might affect markets; Country supplies lots of frozen shrimp and catfish to U.S.
Tainted Toothpaste Found in US Prisons; safety issues widespread.
Also Wednesday, Beijing police raided a village where live pigs were force-fed wastewater to boost their weight before slaughter, state media reported.In other words: you can't trust Chinese suppliers, Chinese government agencies, U.S. government agencies or the U.S. companies importig the food products. What possible actions are going to establish a level of accountability and trust which would cause you to risk your life and start buying Chinese tires, toothpaste, seafood, etc. again?
Realistically speaking, the system is so broken it seems impossible that any such verifiable trust can ever be established. Think this through: The U.S. corporation insists that the products are inspected and certified. Wow, great oversight here. Ah, but the tainted/adulterated food has already been inspected and tagged as safe. How exactly do you get around this? You can't, unless you post the equivalent of an FDA inspector at every food plant in China--and the inspector would have to be a native speaker, politically powerful enough to be protected from threats. If you think this is possible at any price, please read on: China Faces a New Worry: Heavy Metals in the Food: (Wall Street Journal, subscription required but you can always read it for free at the Library)
Concerns are mounting internationally as China plays a growing role in the global food industry. The country's exports currently account for about 12% of global trade in fruits and vegetables. China's agricultural exports to the U.S. rose to $2.26 billion in 2006 from $133 million in 1980, according to the U.S. Department of Agriculture.In summary: the health of the food supply system in China is compromised at the systemic/fundamental levels of soil, water and air. The government does not have the resources to adequately test, inspect and enforce safety regulations on tens of thousands of producers.
Bottom line: hey, if you have to lie to make a buck, then you lie. The hapless consumer / investor is far, far away, and is powerless to come after you. So why stop lying?
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copyright © 2007 Charles Hugh Smith. All rights reserved in all media.
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