The Real Lesson of the Chinese Food Scandals

Revelations in the Chinese food scandal continue to grow. Consider this list of tainted foods provided by Chinese muckraker Zhou Qing: “Seafood laced with additives that lower men’s sperm counts, soy sauce bulked up with arsenic-tainted human hair swept up from the barbershop floor, and hormone-infused fast food that prompts 6-year-old boys to sprout facial hair and 7-year-old girls to grow breasts.”

Ok, we all get the point by now—don’t trust imported food from China. But there is a much larger lesson to be learned here and that lesson is to understand why our own domestic food supply is not similarly contaminated.

The common wisdom about anything is often wrong. In the case of the Chinese food scandals, the common wisdom seems to stem from one belief—namely that it is only because of our own strong food regulations that the United States has escaped its own domestic food scandals. This belief is dangerously false.

This belief can be almost instantly dismissed as it is unsupported by recent evidence. After all, have not the Food and Drug Administration and other government agencies allowed numerous shipments of tainted imports into this country? If the FDA is an effective watchdog, why has the FDA only recently acted to block imports of five types of farm-raised Chinese seafood that are routinely contaminated with dangerous chemicals? If our government is a champion of the consumer, why is there a loophole in the law that permits corporations to use imported ingredients and not disclose the origin of those ingredients on their product labels?

But this belief that the government has protected us is more than unsupported, it is also dangerously false. The belief is dangerously false because it feeds the belief that corporations are made of individuals who would poison our fellow citizens if not for the watchful eye of government. This belief is corrosive to our liberty and prosperity.

What then has protected us that from our own scandals? There is one major force at work that most would never consider—our food is safe because we have relatively free-markets. Before we examine this point, let’s return for a minute to China and author Zhou Qing.

Zhou Qing tells a disturbing tale about a poisonous pig-feed additive called clenbuterol. Although it is poisonous to humans, it makes pork redder and meatier. Newsweek tells this story:

Zhou hears from a food-safety official about a provincial political leader told by a farmer that his pigs still get the banned chemical because it makes their meat a hot seller in urban areas. “Don’t you know that it harms people?” asks the official. “‘Yes,” replies the farmer. “But city people have free medical care, so it’s no problem.”

I would state with certainly that very few American businessman or farmers think like the Chinese farmer. They don’t think: “City dwellers are buying my product; I can harm them.” James Surowiecki in his Forbes essay “A Virtuous Cycle” helps us to understand why. He explains that a key ingredient in the development of free-markets is trust, and capitalism has been moving in the direction of more trust:

That evolution, of course, has not taken place because capitalists are naturally good people. Instead, it’s taken place because the benefits of trust—that is, of being trusting and of being trustworthy—are potentially immense and because a successful market system teaches people to recognize those benefits. At this point, it’s been well demonstrated that flourishing economies require a healthy level of trust in the reliability and fairness of everyday transactions. If you assumed every potential deal was a rip-off or that the products you were buying were probably going to be lemons, then very little business would get done.

In other words, in a free-market economy, a firm’s reputation is critical to its success. In the United States, firms don’t poison their consumers, not just because their ethical values won’t allow it, but also because their reputation would be destroyed and with that, their profits.

In a free-market economy, honest transactions do not occur only if you have affection for the people with whom you are dealing. The Chinese pig farmer who is poisoning others is able to sleep at night because there is no social norm of trust that has been established by commerce in a free-market. In his eyes, city dwellers were less worthy than rural dwellers. Perhaps to the city dwellers, the farmer was just a mere peasant. Both attitudes breed contempt and bad behavior. Provincial and ethnic prejudices run very deep in China.

In our own country, let us count our blessings. Our food supply is relatively safe not because we have strong government watchdogs, but because we have a strong free-market economy.