Milk of human blindness

China's dairy scandal could happen again unless the government sees that major reforms are needed to uproot a culture of corruption. 

China’s dairy scandal has taken the lives of four babies and left more than 54,000 infants with kidney stones. But the real problem is the system which allows such scandals to occur.

Addressing the World Economic Forum meeting in the port city of Tianjin, Prime Minister Wen Jiabao seemed to understand what is needed to fix the problem. He said Beijing would face the milk crisis “candidly” and he called for improved “corporate morality”. But this missed the point by a country mile.

Improved corporate morality is essential but it is not going to be achieved by a government edict.

This is not China’s first toxic food scare. Many of them have bubbled to the surface over the past ten years. Wikipedia, which is often inaccessible from China, provides an extensive list of food contamination incidents that have occurred since 2004.

And while draconian punishments, including executions, have been meted out in the past, little progress in corporate morality is apparent. Production of shoddy food and medicines continues unabated as unscrupulous business people pursue higher profits, often with the collusion of corrupt government officials.

In the current crisis more than 20 people have been detained for adding the toxic chemical melamine to milk. However, over 11 percent of the country’s milk may have been contaminated with the toxin, so more than a few people must be responsible. It is possible that some local government officials and even some dairy companies were complicit in the scam or were at least turning a blind eye to the addition of deadly chemicals to products intended for human consumption.

No doubt the outcome of the investigation will be the execution of some milk brokers and even of some government officials . But it is unlikely that this will change the modus operandi of the market.

In the latest news on the crisis, the World Health Organisation (WHO) has raised concerns that Chinese authorities must have known of the problem for some time before news of it broke in early September.

As it currently appears, the central government only came clean about the baby formula crisis after the New Zealand government raised the matter. It is conceivable that had Wellington not blown the whistle, the cover-up might have been allowed to continue.

Recently, the Chinese blogosphere has been buzzing with reports that media outlets were stopped from reporting on the rise in kidney stones in infants as early as July. One newspaper from southern Guangdong Province, Nanfang Zhoumo (Southern Weekend), was stopped from reporting a possible link of the sick infants with baby formula according to a recent blog posting by its own editor, Fu Jianfeng.

The blog posting has since been removed and Fu has been unavailable to talk with the media.

Reports are now surfacing that families of affected children are being pressured to withdraw law suits against Chinese companies. Part of the reason is that a number of the leading-brand companies implicated in the affair are owned or partly owned by the central or provincial governments. The Communist Party does not want to be embarrassed or to make massive compensation payouts. Lawyers representing the victims’ families have been told that “the Communist Party should be trusted to do the right thing”.

Had China’s dairy crisis occurred in a Western-style democracy, senior government ministers and bureaucrats would have been forced to resign. But not in the one-party state that is China.

If the Chinese government seriously intends to ensure that this crisis will not recur it needs to do three things.

First, food companies need to be privatized. As long as the State retains a fiduciary interest in these companies they will remain untouchable. China can introduce stringent food and drug regulations, but corporate morality will not improve until company directors fear the law.

Second, China must establish a rule-of-law culture. As long as guanxi (or relationships culture) is allowed to continue, there will be individuals who believe their relationship with a government official gives them immunity from the law. China needs to adopt the Western concept of “separation of powers”. Its courts need to be independent of the government so that they can investigate and prosecute criminal activities, including those involving government officials. At present, only government officials who find themselves on the wrong side of an ideological debate or faction fight need fear prosecution.

Third, China should unleash its media. An independent media is critical for keeping both the private sector and the government honest. The media should be allowed to raise important questions about when the central government became aware of the milk problem and which officials were involved in a possible national cover-up.

China’s goal for the 21st century is to build a civic and harmonious society. Major political reform is essential to achieving this. But with too many vested interests at the top, reform remains a pipe dream for ordinary citizens.

Wen Jiabao, China’s honourable Prime Minister, who is wheeled out at every catastrophe to restore confidence in the system, may welcome a candid review of the dairy scandal. But the current system does not,and perhaps cannot, lend itself to a transparent and impartial investigation. Until genuine political reform occurs little will change to improve morality and ethics in China. In the meantime, as the ancient Chinese adage has it, the people will continue to chi ku, to feast on bitterness.

Constance Kong is the pen name of a Shanghai-based business consultant.

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