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.