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Economics

Horsemeat & Horsepucky

Horsemeat & Horsepucky

Evan Leeson

Evan Leeson

As the Great Horsemeat Crisis continues to spread—“gallops” is the verb favored by the European press—across the continent, and countries pile on to blame Romania (France, Holland, Cyprus, etc.), what is becoming increasingly clear is that old-fashioned corporate greed, aided and abetted by politicians eager to gut “costly” regulations and industrial inspection regimes is behind the scandal.

In a sense it is fitting that the whole imbroglio began in Ireland, where inspectors in Ulster first indentified that hamburgers should have more properly been labeled “horsewiches.” The Emerald Isle has more horses than any country in Europe, and, according to the Financial Times, in 2007 Ireland produced 12,633 thoroughbred foals and has some 110,000 “sport” horses.

The year 2007 was just before the Irish real estate bubble imploded, bankrupting the nation and impoverishing millions. And the year the “Celtic Tiger” died was very bad news for horses. Thousands of the creatures were simply turned loose by their financially strapped owners, and the number of horses sent to slaughterhouses jumped from 2,000 in 2008 to 25,000 in 2012. The Irish-horse connection goes back to when Celtic speaking people first burst out of Central Europe during the second century B.C. Celtic cavalry and chariots—the Celts introduced the latter to Europe—were pretty formidable, as the Romans discovered on a number of occasions.

Horses have always been a high status item in Ireland, and during the colonial period the English figured out a devilishly clever way to take advantage of that. According to the Irish Penal Laws of 1692, no Catholic—the vast majority of native Irish were Roman Catholics—could own a horse worth more than five pounds. So the English would go into the countryside, select a thoroughbred, and force the breeder to sell them his horse for a pittance. Sometimes the “buyers” would then turn right around and re-sell the animal to its former owner for hundreds of pounds.

When the Irish first discovered horsemeat in the food chain, they claimed innocence and blamed the Poles. It turns out, however, that a small slaughterhouse in Tipperary was shipping horsemeat labeled as beef to the Czech Republic. The British blamed the Romanians, and Rupert Murdoch’s newspaper, The Sun, took the opportunity to indulge in his favorite sport: ethnic bashing. A “grim Romanian slaughterhouse built with EU (European Union) cash” was the culprit, blared the largest (and sleaziest) tabloid in England.

The Romanians did indeed use EU cash to build a plant, but the slaughterhouse produced records showing that they had correctly identified the meat as horse. Romanian Prime Minister Victor Ponta complained that Romania was routinely made the EU’s scapegoat.

Then the Swedes got into the act and blamed France, and it does appear it was the French company Spanghero that slipped “old Dobbin” into the food chain. Spanghero denied the charge and, in its defense, trotted out yet another animal: a weeping crocodile. “My first thought is for the employees,” said a choked up Laurent Spanghero at a press conference. “My second thought goes to our kids and grandkids that carry our name. We have always taught them the values of courage and loyalty and today we have been plunged into dishonor.”

Except, according to French Consumer Affairs Minister Benoit Hamon, Spanghero could hardly have failed to notice that the meat it was importing from Romania was much cheaper than what the company normally paid for beef. A kilo of horsemeat costs .66 cents, a kilo of beef, $3.95. According to Hamon, Spanghero made $733,800 substituting horsemeat for beef. Then things got really murky. The Netherlands said the Cyprus-based meat vendor Draap that sold the meat to Spanghold was responsible, and the company’s track record would suggest the Dutch had a point. In 2012 Draap was convicted of selling South American horsemeat labeled as German and Dutch beef.

But it turns out Draap—based in Cyprus but run by a trust in the British Virgin Islands—is owned by the company Guardstand, that in turn owns part of the arms dealing company, Ilex Ventures. According to prosecutors in New York, convicted international arms dealer Viktor Bout owns Ilex Ventures. Guardstand’s sole shareholder, reports Jamie Doward of The Observer, is Trident Trust, which sets up companies in tax-free nations. Guardstand helped set up Ilex.

Sorting this out will be nigh on impossible, because tax havens like Cyprus and the British Virgin Islands are not about to give up their secrets, and the powerful corporations that shelter their ill-gotten gains there know how to keep inspectors at bay. Hypocrisy has been in abundance during the Great Horsemeat Crisis.

Owen Paterson, the British environmental secretary who oversees food safety and a member of the Conservative Party, thundered in Parliament about an “international conspiracy.” However, the current Conservative-Liberal government has instituted cutbacks on inspections by the Food Standards Agency (FSA), and turned enforcement over to some 330 local authorities. “It is a shame that testing by the FSA has been reduced,” Dr. Chris Smart told The Guardian. “I am sure there will be other crises that come along in the next few years.” And given that UK food prices have risen nearly 26 percent that will surely be the case. Inspectors have already uncovered adulterated olive oil and paprika made from roof tiles.

At the heart of this are the continent-wide austerity programs that have driven up the ranks of the poor, requiring low-income families to rely on cheap meat or go without. “Why was horsemeat present in beef burgers?” asks Elizabeth Dowler, a professor of food and social policy at Warwick University, “Because the price has to be kept as low as possible.” Horsemeat is one-fifth the price of beef, so the temptation is to either adulterate beef with horse, or sell it as cheap beef. “This has the most impact on those with low income and large numbers of children,” says Dowler. “People in this situation have no money to buy better quality burgers, or to go to a butcher and make their own mincemeat. Instead they depend on special 3-for-2 offers. The problem is linked to poverty.”

Horsemeat for some, beer and skittles for the likes of Spanghero. But the real culprits in this crisis are the banks in Britain, Ireland, Germany, the Netherlands, and Spain that ignited the economic crisis by artificially pumping up real estate bubbles. Up there in the docket with the bankers should be the politicians who shoved through development schemes, waved environmental regulations, and turned a blind eye to speculation. And when everything crashed, the taxpayers—the vast majority of whom never got in on the boom years—got stuck with the bill.

Poor Ireland. The EU enforced austerity scheme has raised the unemployment level to above 15 percent—30 percent for young people—and saddled homeowners with onerous tax and fee hikes. Wages have been cut, health care fees raised and welfare butchered. In spite of these “reforms,” the economy grew an anemic 0.9 percent in 2012, and is scheduled to rise to 1.5 percent in 2013, down from the 2.2 the government originally predicted.

And the Irish economy is actually much worse than the figures indicate, because much of the wealth Ireland currently creates goes into the coffers of huge multinationals attracted to the island’s 12.5 percent corporate tax rate, the lowest in Europe. As The Economist points out, “The Irish people have fared much worse than the Irish economy.” And the pain for the average Irish working person is due to get worse. The 2013 budget will cut spending $4.6 billion, increase taxes, and add yet more austerity in 2014 and 2015. All of this woe has drawn widespread praise from the EU and the International Monetary Fund, which suggests that if a bank praises you, it is time to reach for a barricade.

This is not just a European problem, because the trend toward cutting back on regulations and inspections is worldwide. For instance, under pressure from the agricultural lobby, the U.S. Food and Drug Administration has backed off trying to reduce the amount of antibiotics used on livestock. According to a recent report by the National Antimicrobial Resistance Monitoring System, 80 percent of all the antibiotics manufactured in the U.S. are used on farm animals. The result is that antibiotic-resistant salmonella is spreading rapidly in chicken and turkey populations, and turning up in hospitals, clinics and gymnasiums.

Horsemeat is going to be the least of our problems.

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