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.