This week, the column comes to you from Turin, home of Juventus, where nobody seemed the slightest bit surprised that the team – champions of Italy – could go to Glasgow and so ruthlessly dispatch Celtic. That was, for the locals at least, a given.
However, two other issues are perplexing people here, and have dominated the news all week. The first is the Pope’s decision to stand down, which is being met with all sorts of conspiracy theories and Da Vinci Code-style intrigue. This understandably shrouds commentary and analysis about the secretive seat of power that is the Vatican.
The second issue alarming this food-obsessed nation is the spread of the ‘horsemeat’ scandal. Initially an Irish problem, then a British one, it is now threatening the entire European food supply chain, from obscure abattoirs in Poland and Romania to meat dealers in Cyprus, trading companies in Luxembourg and supermarkets all over the continent.
Like the scandals we have experienced in the past few years in the banks, the momentum of this story is following a similar pattern. First, we have an isolated incident in one country, which at first appeared to be a unique issue of local malpractice. But then it becomes clear that the local incident is only part of a greater systemic issue.
The similarities between the banking scandals and the food scandals are eerie. The main reason is that both industries are based on trust and both have become globalised in the past decades.
Now the supply chain has spread all over the world to the extent that no one knows where their food comes from – in the same way as no one really knows where the money for their mortgage came from.
Most people didn’t ask questions either, because most of us trust the system. But few took any notice of what was happening to that system. In the past few years, food – like finance – has become a commodity traded all over the world by people who never get their hands dirty.
Did you know that, in the past five years, financial speculation in food commodities has doubled from $65 billion in 2006 to $126 billion in 2011? Or did you consider the implications of the involvement of pure financial traders in the food business?
In 1996, the futures market in food commodities was largely driven by food traders trying to ‘insure’ themselves against movements in food prices, which are driven by weather and harvest concerns. More than 80 per cent of all traders in food futures were themselves food traders. Today, food traders are a minority, and pure financial speculators account for over 65 per cent of the market. These guys help to drive the price of food upwards, which has been the case in the past few years.
So food consumption, production and financing, which most of us thought of as local, is actually truly global. Now let’s look briefly at the position of meat in our diet and how that has changed in the past decades, before we examine how recent austerity has affected our food consumption.
Over the years, people in many western countries have come to expect meat to be the main source of our protein. This is a big break from the history of human meat consumption. For years, meat was regarded as a luxury; it is now a staple. However, we are spending much less of our weekly income on food and, at the same time, have come to expect good meat to be affordable. Food once was one of the major household expenses, but Irish households now spend less on food than on transport, culture and recreation, housing or fuel.
So expecting good meat to be cheap meat is one of the driving forces behind the horsemeat scandal. If we superimpose on this expectation, the reality of squeezed household incomes resulting from austerity, we can see where this is leading. More and more people have less and less money to spend on meat. They thus want cheaper and cheaper meat without asking where this cheaper and cheaper meat is coming from.
This demand for cheaper meat is driving the food supply chain to weirder and weirder places. Supermarkets, under pressure to offer cheap food, demand that suppliers provide products for less. That means bulking out burgers with the cheapest ingredients possible. Were you surprised when you heard, a few weeks ago, meat industry people referring almost nonchalantly to Polish ‘bulking agents’ in beef? I was.
Most of us didn’t really think about the implications of all this for the Irish food chain. We thought our dinners were a localised affair from Irish farm to factory to table. Now a convoluted trail has been revealed which spreads across countries between agents, middlemen and dealers of all sorts.
Once an industry becomes globalised, the premium on trust and regulation increases. This is where the food scandals and the recent banking scandals become rather similar. The quest for cheap food in a globalised industry becomes akin to the quest for cheap money in a similarly globalised industry.
Details of links between Polish abattoirs via Irish burger factories to Irish dinners have been revealed in the same way as it became apparent that German money was financing Irish ‘ghost estates’ via original German lending to Irish banks.
And then, in an episode scarily reminiscent of the financial rating agencies rating assets ‘AAA’ when they were junk, we have stories of food sources stamping food ‘beef’ when it is horsemeat.
When an industry becomes globalised, people come to rely on stamping and quality control in a way that wasn’t so absolute before. What is the point in reading the labels on food for ingredients if we now know that beef is actually horse? What or who can you trust?
As this crisis unfolds and becomes headline news in Italy, we see that, like financial contagion, food scare contagion spreads as country after country becomes involved. All the while the unsuspecting general public is kept in the dark until the breadth of the crisis becomes evident. This is when people panic.
And now comes the hard part, which is rebuilding broken trust. We have many interested parties. We have shareholders of large food companies who seek profit; we have speculators driving up commodity prices fuelled by cheap money printed by central banks; we have supermarkets under pressure to provide cheap meat to people who either don’t want to buy, or can’t afford, more expensive meat; and we have a food supply chain that extends all over the globe, where checks and balances are naturally strained.
And food labelling, the consumer’s only backstop against fraud and only way of knowing what we are eating, has become tainted, with horsemeat mislabelled as beef and a range of other cases also now being highlighted.
Taken together, we can see that it’s a long road ahead for food producers. This is a particularly acute challenge for the country that markets itself as the ‘Food Island’.
David McWilliams’ new book The Good Room is out now.
I did it
My take on it is :
Farmers should keep their STAKE with their Wellingtons on ….and to sell their STEAK directly outside the scrutiny of Greedy Middlemen …and Corporate Culture …..and mark it as Pure Manure .
David, If I may be so bold to claim – you have 100% explained the basis of the economic woes being faced in our modern industrialized world. There is nothing new here. This globalization has been going on for decades. The only reason people are getting heated up about it is because a)it affects their paycheck and b)its what is fed to them literally. Pick any product and it is guaranteed to be part of a global cost optimization machine and yes, financial / commodity trading will be part of the deal – right down to procurement, cost engineering and… Read more »
Pat kenny show this morning said it all about real life in Ireland in 2013.
How the irish people are suffering under FG / LB and we have now reached the abouse of our human rights.
Shame on this sham government ,what planet are they on .
This government gets upset over horse meat and lame deals with ECB , while people can’t survive
What a banana republic.
Next thing will be the opening of FG/LAB soup kitchen run by interns.
Kenny/Gilmore hang your heads in shame
Promissory Beef! Pure Mule!
I knew you would figure out away to get in on horsey debate.
I don’t think the reference in the article to austerity has much to do with the proliferation of cheap food – that has been going on for decades with the growth of the big supermarket chains.
Consumers demand for prepared meals is growing (witness the foil trays with meat and 2 veg) and producers will continue to seek ways to cut costs.
The horse meat scandal is not a suprise. The big question is which food product will be next because “beef” can’t be the only tainted product.
Forget the negative comments guys. This is a chance for the “Food Island” to flood the market with traceable food.
Get Positive, get going, get real beef on the market, get out of debt. There is a big world out there where people do not moan.
They take advantage of opportunities.
Hi David, Interesting article! I would be interested in getting your views on whether there should be a ban/restriction imposed on financial speculators getting involved in food commodities trading? Perhaps they provide liquidity in some instances but apart from that they just seem to drive up prices as you rightly point out. It might make for an interesting article in the future. In terms of the horsemeat scandal, I agree that trust has been broken. Whilst supermarkets may claim that they are the victims, they have to take a real look in the mirror. What else did they think that… Read more »
Good article David Still,I am afraid for me and perhaps people like me although I try not to speak for everyone..This is still a non-story,inflated to distract. Globalization,Monsanto Corporation,G.M.Os Multinationals,driving prices to ground zero, big Supermarkets only paying suppliers 4 times a year….Huge Haulage firms turning over multi-millions working on a profit of 3% ! We are in the eye of a Storm,the criminalization of the working class,the eradication of the Middle Class,unelected advisers with power in Governments. Everything sub-contacted,no gainful employment,slave labor promoted by Government through internships… No manufacturing,inventing,creating real tangible devices….Service economy depending on wild consumerism.. queuing for… Read more »
I read over week end that a Ukranian is seeking Share Capital to commence a Horse Packaging Co in NW Ireland …why do foreigners show us what to do ? Insular minds are funnel vision to the indigenous on a small island .
The horse meat scandal is another wake up call for the masses and I welcome the distraction. It is another sign that the experiment in globalisation is failing miserably. The news coincides with a damaging report from the University of Illinois which finds that GMO food is useless and has a lower yield than crops grown from conventional seed. However people need to stay awake because Monsanto will fight to the end for worldwide control of food crops: GMO fail: Monsanto foiled by feds, Supreme Court, and science http://grist.org/article/gmo-fail-monsanto-foiled-by-feds-supreme-court-and-science/ Small farmers around the world are fighting back and I hope… Read more »
That Celtic comment was surely a wind up at Pauldiv, David. Take it away Paul.
One of the greatest insight providers of the current modern age is James Howard Kunstler. And one of his theories is that in televisual, hydrocarbon, consumerist age, that people live according to the principle of “something for nothing”. The media promises you something for nothing. Retailing promises it. Politicians promise it. Business promise it. Union leaders promise it. Everybody promises it. And a surprising proportion of the population believes it. There has been a bull market in “something for nothing” for decades. It has been building into a climax. Money is not even printed anymore. Central bankers tap on the… Read more »
Ever wake up and feel today is going to be a good day and unless you go around with blinkers on and ear muffs its near impossible to have the good day. Now with that in mind who’s fooling who you here the government harping on about new jobs coming to a cinama near you ,there’s more jobs being lost then thoes being made. Forget about horse meat ,its only a distraction from whats realy going on,life as we know it is being eroded . The gap is growing and we are being pulled in the driction of the haves… Read more »
This is part of what DMcW mentioned going on.
WARREN BUFFETT buys H.J. Heinz. It’s a $27.2 billion deal announced Feb. 14, by Berkshire-Hathaway and 3G Capital Management (Brazil-based shark firm), to take over the Pittsburgh-headquartered giant Heinz food processing company. The acquisition typifies the rush move into the food chain by dirty Big Money.
[…] Here’s an excerpt from the article. Â The rest can be found on his blog here […]
DMcW, great stuff. Is it the air south of the Alps, or Giulio Tremonti’s economics election campaign perhaps – you have got it spot on.
Keiser Report Horsemeat and what’s in Financial Products from 130214
IBRC to pay bondholders 100 cents in the euro
Depositors to be burned â‚¬123 million ? heard tonight..anyone else hear this ?
The price of Gold continues to fall and fall however the price of a gram of a meteorite rock rises to extraordinary heights .Moon Wobble.
Coincidentally Positive Money UK have a blog on Food Speculation today. ”Anti-poverty campaigners launched a new campaign against food speculation today. The campaign “Bankers Anonymous” by the World Development Movement asks people to take five steps to help win new rules to prevent banks driving food prices up through financial speculation.” More information can be found at: http://www.positivemoney.org/2013/02/bankers-anonymous-launched-to-help-banks-kick-gambling-addiction/ Also, careful David! You say ”we have speculators driving up commodity prices fuelled by cheap money printed by central banks”. This supports the misleading impression that central banks create our money through printing. However central banks normally create money as central bank… Read more »
Had a good day on the water yesterday.Just the job to clear the mind
With just one crew(short handed) we managed a second over the finish line and a third in corrected time out of a fleet of 23 boats.
It was light air and wet. Currents, wind and tide all played a part. An eye on the horizon looking for any changes coming and a check on the longer term weather forecast was useful.
A bit like economics; horse sense. But preparation helps as the sails and boat hull need to be maintained in good condition.
Great ad to lift the mind
I can go to sleep at night and know one thing—the Fed will not allow deflation. The reason is simple, according to Harris…Debt based societies cannot absorb a deflationary spiral. – Yra Harris, legendary and longtime commodities trader.
Guys new of the latest revelations are anything new. The only new thing is the fact that we have the luxury of DNA testing to prove what the food industry knew all along but the consumer clearly didn’t. Anyone who has ever consumed a kebab should know what that shit does to your system if you don’t already know from experience. If anyone really knew the extent of the CAP refund system and the garbage that was exported out of this country in the name of beef in the 80s you would be calling for a public inquiry. Guess what?… Read more »
“Like the scandals we have experienced in the past few years in the banks, the momentum of this story is following a similar pattern. First, we have an isolated incident in one country, which at first appeared to be a unique issue of local malpractice. But then it becomes clear that the local incident is only part of a greater systemic issue“. Exactly. Systemic issues, the system itself. So remedies must deal with that system , not the apparently isolated events. This may sound abstract until some end up eating the system in the horse stew. Most prefer to think… Read more »
Today will be a good day. After two months frustration of having no landline at all and therefore appalling internet connection and still having to pay for the lack of services my phone and internet will be fixed. Two months of shouting on the phone to get it fixed will hopefully be over from today on.
A good account of the dictatorial FDR seizing private property and then closing all private banks except the cartel ones and revaluing the gold 60% higher after getting it.
good read anyway. obama thinks he is the second coming of FDR according to the article.
30,000 Euros a minute is the rate of the increase in national debt.
18 million and hour
432 million a day
157.68 billion a year
‘Pretty soon we will be talking real money”
Gold continues to fall down in value today while the Russians raise the value of meteorite rock .
Supposing we had a gold standard? Supposing we had financial stability and removed all the middlemen and traders and central banks etc. And supposing GS separation was in place? Are we seriously saying the horse-meat scandal would never have emerged? Of course it would. Are we saying that jobs would not be lost to lower cost regions? Of course they would. Are we saying that poverty and strife would diminish worldwide? Of course it would not. The problem is that people’s ability to change and adapt is far far lower than the rate at which business changes to seek profit.… Read more »
Boss of Iceland makes an ass of himself on television with slur on the Irish Bros
Mr Walker had been asked to explain why Iceland burgers passed British tests for equine DNA but failed the Irish tests.
He replied: “Well, that’s the Irish, isn’t it?”
This proves one thing. Successful and ‘educated’ people can be complete losers.
This horsemeat scandal is only the tip of the iceberg. I was reading recently a post about baby food and boy is this scary! Baby food is even less regulated than adult food. The health claims on the jars are just marketing ploys to lure gullible parents into buying them as the content of those jars are empty calories with very little actual food in it (a baby carrot purÃ©e contains less than 40% carrots in it, the rest being made up of water and thickening agents, much cheaper to produce) and even these actual food bear no more nutritional… Read more »
A wee heads up here and I hope this helps. Glad to see so many warriors came and answered your call as the overwhelming compassion from people on this forum sometimes overwhelmes and humbles me to tears. Not. Fuck them. It is they who are selfish and superior. Not honest men like yourselves Keep your heads up. I’ve been there and know what it feels like to be unhappy every morning and my worst bout of unhappiness was during the boom. Today life is way better than it was back then personally speaking. Never be ashamed of who you are… Read more »
Hatchet job from the Irish Independent rag
Q. Who is Mr Norb?
Aka Mr Norbert
More to the point who is Gerard O’Regan
I presume he is a junior hack who is taking it in the ass and giving some some head as a backroom boy
Little Joe never once gave it away
Everybody had to pay and pay
Read more: LOU REED – WALK ON THE WILD SIDE LYRICS
A daft wee boy trying to get a break in a mans world
Maybe his daddy is ‘well connected’
Q. Who do these people think they are?
David whats your next story going to be .
The rise and fall of Fianna FÃ¡il and the rise again ,for five years they where in a coma and like a bad smell and the help of the Irish people they will rise like Lazarus go help us ..
Insight and gravitas possibly. Bitterness certainly. Someone who can see reality for sure. No mystery in itself but his foresight could be attributed to his ginger locks, freckeles and Scottish grandparents. Hail hail David. I know you secretly admire Celtic much more than Revie’s Leeds. You can’t deny something that was so awesome and such a statement of Celtic and Irish superiority on the fields of the greatest football stadiums in the world You were simply blown away by the Jinky fella, Auld and Yogi Bear (Hughes). Blown away and humiliated and left for dead. I know it still hurts… Read more »
Will Obama follow FDR and revalue gold 68%
Or in other words devalue against gold to rebalance the books.to do so will require $10,000 gold not $3000. Add the off the books contingent liabilities and we will see $100,000 gold. Still considerably less than Zimbabwe!!
Global money crises – Global energy crises – Global food crises – Global population crises – Global Growth is on its way to make a Global disaster – Global stocks are rising – Global inflation crisis Global war – Global warming- Global trotting carbon footprint – Global pollution – Global Globalism – Global oil Global Gobbling – Gobbling the Globe—I have a pain in me Globles , A Global pain.
Sweet Breads taste nice
Commentators now say bond rates will collapse and lead to interest rate rises, especially if China creates a gold backed currency. Could someone explain this and suggest a timeline?
Low wages was responsible for the wall street crash – people on low wages can’t afford to buy services from businesses so businesses close – people on low wages can’t afford medical expenses to keep themselves fit to go to work for low wages – we have gone from low to no wages (interns) how can an intern help an economy move – low wages stifles the money cycle – my income comes from your spending and my income spending is your wages – money has no value if it’s static – Henry Ford knew the value of paying his… Read more »
From what they write here I am going to see if I can guess the age and looks of people.
The article is about food but predicatably the conversation comes round to gold and glass seagull. Concepts which mean nothing to me
It is not gold you should be investing in but food. Gold is useless. Far better to learn how to sow potatoes, barley and wheat and find a source of firewood for the winter
Whether one knows it or not, a bailout was never possible. They are going to dump the existing monetary madness and instate a much smaller one for the few. The effect of this should be clear to everyone. A Bailout was Never Possible: The Intent is Genocide Lyndon LaRouche forecast the only possible future policy direction that can result from the current ‘bail-out’ and ‘quantitative easing’ policiies under, presently, Obama and Federal Reserve Chairman Ben Bernanke. The only possible way to deal with this is to now split the banks along the lines of Glass-Steagall and reinstate immediately Hamiltonian credit… Read more »
Gold Prices continue to FALL …sentiments hold nothing for it .
Irish Farmers need to be Carnivorous and create :
the ‘Carno Dollar ‘…..with this we can BUILD and New Economy
Who says Ireland is at the edge of Europe?
Who says Ireland is at the centre of the Western World?