Other entries featuring Viv Forbes» , Bert Kelly»

Viv ForbesOur Sacred Land & Other Essays (first published by Business Queensland and Common Sense in 1994), issue no. 102.About the Author»

The Australian meat industry has more bureaucrats per producer than any other industry. There are stock inspectors, meat inspectors, health inspectors, factory inspectors, “research” bureaucrats, state and federal departments of primary industries, health departments, quarantine inspectors, consumer affairs officials, levy collectors, state and federal meat and livestock authorities and hundreds of rules and regulations. All of this funded by fees on every beast that bellows or bleats.

I don’t know what it all costs us, but a US study found that a pound of hamburger meat costs eleven cents more because it was controlled by 41,000 regulations, 200 legal statuses and 161,000 precedent-setting court cases on behalf of consumers. (I do know that Darling Downs Bacon Co-op, once Australia’s largest pork exporter, abandoned pork exporting in 1993 because it was costing $1.7 million per year for export licences and red tape.)

Despite all this costly supervision, the meat industry is regularly hit by meat quality scandals. We’ve had the horse meat switch, the kangaroo caper, the pet meat swap, the cane tops contamination, the potato pesticide problem, and now the cotton trash scandal. Every meat producer, irrespective of the quality of his meat, is hurt by these national meat demotions. Maybe it is time to question whether producers or consumers get value from the costly and high risk nationalised beef brand.

The recent discovery of meat contamination through cotton trash sent a tidal wave of concern through every export market. Despite the extremely limited nature of the contamination, American, Canadian and Japanese meat producers (and their mates in the media both here and overseas) had a field day reporting the withdrawal of Aussie Beef from sale.

Every producer and exporter was punished for an innocent mistake by a few desperate drought stricken farmers and a slack government meat inspection service.

When a nationalised brand name is devalued, the cost is enormous because it devalues every kilo of meat in the country. Our beef industry can no longer afford the costs and risks of nationalised beef brands.

Private brand names have one great advantage — their costs and their benefits are confined to those who deserve to get them.

For example, ten years ago, British Airways served contaminated prawns to its first class passengers. 766 passengers and crew were hit by salmonella poisoning. One died and several became seriously ill. Within weeks the airline had paid out $1.5 million to victims and had been hit by four law suits claiming over $11 million in compensation.

British Airways suffered great damage to its brand name and balance sheet, but (and this is important) no other airline was damaged — only the offending brand. To restore the value of their brand name, British Airways immediately spent $8 million refurbishing their catering centre at Heathrow in London. (This was probably demanded by their insurer, who also had a vested interest in preventing a repeat of such payouts.)

Competing brands are not only shielded from the cost of scandals in competing products, they actually benefit when a competitor falters. Qantas, Pan Am and others were immediate beneficiaries of the prawn problem at British Airways.

However, with nationalised brands like “Aussie-Beef,” the only beneficiaries of its problems are foreign competitors.

The fatal problem of nationalised brands is that no individual or company sees specific benefit in protecting the brand name, and many see the supporting rules and regulations as a cost and an intrusion. What is available to everyone and charged to everyone, becomes of value to no one.

A more insidious problem concerns the tendency towards complacency, laziness, discrimination and corruption in any regulatory service. This alternates with demands for more cash and more power.

Way back in 1975 and 1977, complaints were made to Victorian and Federal meat inspectors about the illegal diversion of low quality domestic beef into the export market. Nothing was done “because of fears the impact of disclosures may have on Australia’s meat export trade.”

Three major Australian Meat exporters complained again in 1980, this time to Federal Police, about meat substitution (which by then included horse meat). Bert Kelly chaired an investigation which reported that abattoir managers were using gifts to induce meat inspectors to look the other way. Bert’s report was shelved.

Nothing happened to fix the problem until Aussie meat hit the mincer in San Diego in July 1981 — out of a shipment of 600 cartons of beef, 102 contained horse meat. The consequences were swift and devastating — trading in beef futures was suspended, Australian beef in the US was quarantined, newspapers headlined the story and the US Department of Agriculture (an arm of the US Beef producers) delegated 2,000 officials to investigate the problem. The price of US, Canadian and NZ beef rose 20c per pound. One of Australia’s largest meat exporters, Smorgon’s (who were not involved in the fraud), suspended their operations.

The subsequent Royal Commission reported administrative timidity, bureaucratic inefficiency, deliberate cover up, corruption among meat inspectors, and a black market in “Australia Approved” meat stamps. (Incidentally, when the Royal Commission was announced, there was an orgy of shredding of “sensitive” files in the Department of Primary Industries in Canberra.)

The scandals and the Royal Commission did cause a major clean up, but they can never solve the root problems. Cycles of excessive cost, complacency and corruption are inevitable in every bureaucratic accreditation scheme. There are too many incentives for cheating and slacking and not enough people with a direct vested interest in quality control and the value of the good name. Public property is no one’s property.

It may be useful for beef producers and bureaucrats to look at the quality controls which regulate the coal industry.

There are many similarities between beef and coal. There are a large number of producers selling a great variety of products into many markets with different preferences. Product specification is difficult, being a blend of measurement, art and tradition. In both, the quality of the product can deteriorate with age and can be degraded by contamination with foreign bodies or inferior products. But in quality control and brand identification, coal works without an army of inspectors and fees and there has never been a scandal to rival the procession of disasters produced by the government beef promotion and inspection services.

Every coal producer has his own brand name and he guarantees the specifications of his product. Every coal shipment is analysed by the producer, by an independent laboratory or by the consumer, usually all three. Every sales contract contains bonuses and penalties if contract specification are not met.

And if a shipment of “Norwich” Brand coal, for example, fails to meet the minimum acceptance standards, no damage is done to the reputation of “Curragh” coal, “South Blackwater” coal or “Burton” coal — in fact, they all would benefit. And you can be sure the next shipment of Norwich coal will meet agreed specifications.

Strong brand names cannot develop in an environment smothered in government regulations and inspections. If it appears to consumers that all beef is of equal quality, guaranteed by the government, why pay more for a particular brand? The possibility of poor quality and fraud is what gives a good brand its value. Bureaucratic quality control destroys the good brands, leaving everyone dependent on the nationalised brand. This faith will always be betrayed eventually because of the three C’s — cost, complacency and corruption.

Our beef market is too important to be left in the hands of bureaucrats. Governments should confine themselves to policing fraud, deceptive labelling, control of contagious diseases and breach of contract. All other quality control is best handled by those with the most to gain or lose.

Japan would not buy “Aussie-Coal”. Why should we expect them to buy “Aussie-Beef”?

(in order of appearance on Economics.org.au)
  1. Lang Hancock's Five Point Plan to Cripple Australia
  2. Put Windmills in National Parks
  3. Magnifying National Disasters
  4. Please Don't Feed the Animals
  5. Buy Birdsville Made?
  6. The Economics of Flood Risk
  7. Touring Bureaucrats
  8. Why Wind Won't Work
  9. A Profusion of "Prices"
  10. R.I.P. Ron Kitching - pioneer, explorer, author, family man, entrepreneur, scholar
  11. The Carbon Pollution Lie
  12. Closing Down Australia
  13. The Anti-Industry
  14. The Pyramid Builders
  15. Carbon Tax Bribery
  16. Crown Monopolies
  17. Carbon Tax Job Losses
  18. What Next, a Tax on Water?
  19. Carbon Health Warnings Coming Soon
  20. Growth Mythology
  21. The Tax Collection Industry
  22. Propaganda Puts Paid to Proof
  23. The Milk of the Welfare Teat is Watered Down
  24. "Crops for Cars" as Bad as Everlasting Drought
  25. Poll speech sets record
  26. The Emissions Trading Casino
  27. The Contract Society
  28. A Model Ministry
  29. The Five Point Plan to kill the economy with High Cost Electricity
  30. Put a Sunset Clause in the Carbon Tax
  31. Stuck on Red
  32. Time to Butcher "Aussie Beef"
  33. Carbon Tax Lies and Bribes
  34. The Middle of the Road
  35. United against taxes
  36. Call for Govt administrator
  37. Property & Prosperity
  38. "The Science is Settled" BUT Durban Climate Summit Not Cancelled
  39. No End to Fuelish Policies?
  40. The Right to Discriminate
  41. Sell the CES
  42. Free Water Costs Too Dam Much
  43. Creating Unemployment
  44. Viv Forbes Wins 1986 Adam Smith Award
  45. 1985 news item on Tax Payers United, Centre 2000 and the Australian Adam Smith Club
  46. Having the numbers is not the same as having the truth
  47. Who's Who in the Workers Party
  48. David Russell Leads 1975 Workers Party Queensland Senate Team
  49. Caught in a welfare whirlpool
  50. Global Warming Season
  51. Mining in Queensland, Past, Present and Future
  52. Political branch formed
  53. Viv Forbes on Libertarian Strategy and the Myth of Constant Resources
  54. The New Brisbane Line?
  55. Carbon Lies
  56. We Mine to Live
  57. Save the taxpayer
  58. Solving Three Canberra Problems
  59. Vested Interests in the Climate Debate
  60. Carbon Tax Retrospective?
  61. Carbon Price Propaganda Taxes the Truth
  62. Don't Burn Food for Motor Spirit - Feed People not Cars
  63. Two Big Climate Taxes
  64. Greens Rediscover Hydrogen Car
  65. Atlas of Australia
  66. Shutting Out The Sun
  67. Safety Mania
  68. Coal - Sinking in the Swamps
  69. Hobbling the Competition
  70. Cubic Currency Coming
  71. "Dear Government"
  72. Viv Forbes mocks Flannery in 1988
  73. Smoking, Health and Freedom
  74. Privatise Now! while they are still worth something
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(in order of appearance on Economics.org.au)
  1. Bert Kelly on Journalism
  2. Move for a body of Modest Members
  3. Modest Members Association
  4. Bert Kelly's Maiden Parliamentary Speech
  5. Government Intervention
  6. 1976 Monday Conference transcript featuring Bert Kelly
  7. Petrol for Farmers
  8. Some Sacred Cows
  9. Experiences in Parliament
  10. Spending your Money
  11. Who needs literary licence?
  12. A touch of Fred's anarchy
  13. Supply and Demand
  14. Bert Kelly on Disaster Relief
  15. Bert Kelly Wants to Secede
  16. Under Labor, is working hard foolish?
  17. An Idiot's Guide to Interventionism
  18. Bert Kelly Destroys the Side Benefits Argument for Government
  19. Bert Kelly gets his head around big-headed bird-brained politics
  20. First Modest Member (Bert Kelly) AFR Column
  21. Second Modest Member (Bert Kelly) AFR Column
  22. Third Modest Member (Bert Kelly) AFR Column
  23. Fourth Modest Member (Bert Kelly) AFR Column
  24. Fifth Modest Member (Bert Kelly) AFR Column
  25. Sixth Modest Member (Bert Kelly) AFR Column
  26. Bert Kelly on the 2011 Budget and Australia's Pathetic Journalists and Politicians
  27. Bert Kelly, Bastard or Simple Sod?
  28. Liberal Backbencher Hits Govt. Over Import Restrictions
  29. Bert Kelly feels a dam coming on at each election
  30. Bert Kelly Enters Parliament
  31. Why take in one another's washing?
  32. Bert Kelly breaks the law, disrespects government and enjoys it
  33. Gillard's galley-powered waterskiing
  34. Can price control really work?
  35. Should we put up with socialism?
  36. We're quick to get sick of socialism
  37. Time the protection racket ended
  38. Can't pull the wool over Farmer Fred
  39. People not Politics
  40. Bert Kelly admits he should have had less faith in politicians
  41. Labor: a girl who couldn't say no
  42. Why leading businessmen carry black briefcases
  43. Ludwig von Mises on page 3 of AFR
  44. Mavis wants the Modest Member to dedicate his book to her
  45. Time to Butcher "Aussie Beef"
  46. Bert Kelly reviews The War Diaries of Weary Dunlop
  47. Bert Kelly reviews We Were There
  48. Tariffs get the fork-tongue treatment
  49. Bert Kelly reduces government to its absurdities
  50. Politician sacrifices his ... honesty
  51. It's all a matter of principle
  52. Bert Kelly Destroys the Infant Industry Argument
  53. Bert Kelly Untangles Tariff Torment
  54. Bert Kelly resorts to prayer
  55. Eccles keeps our nose hard down on the tariff grindstone
  56. "Don't you believe in protecting us against imports from cheap labour countries?"
  57. Even if lucky, we needn't be stupid
  58. Great "freedom of choice" mystery
  59. Small government's growth problem
  60. Tariffs Introduced
  61. More About Tariffs
  62. Sacred cow kicker into print
  63. Modest Member must not give up
  64. Traditional Wheat Farming is Our Birthright and Heritage and Must be Protected!
  65. Bert Kelly brilliantly defends "theoretical academics"
  66. The Society of Modest Members
  67. John Hyde's illogical, soft, complicated, unfocussed and unsuccessful attempt to communicate why he defends markets
  68. Modesty ablaze
  69. Case for ministers staying home
  70. The unusual self-evident simplicity of the Modest Members Society
  71. Animal lib the new scourge of the bush
  72. The Association for the Prevention of Cruelty to Krill
  73. Repeal economic laws, force people to buy new cars and enforce tariffs against overseas tennis players
  74. Thoughts on how to kill dinosaurs
  75. Let's try the chill winds
  76. Taking the Right's road
  77. Bert Kelly: "I did not try often or hard enough"
  78. Bert Kelly "lacked ... guts and wisdom"
  79. A look at life without tariffs
  80. The Gospel according to Bert
  81. Tiny note on Bert Kelly's column in The Bulletin in 1985
  82. Why costs can't be guaranteed
  83. Hitting out with a halo
  84. Paying farmers not to grow crops will save on subsidies, revenge tariffs, etc
  85. "The Modest Farmer joins us" | "How The Modest Farmer came to be"
  86. Bert Kelly Destroys the Freeloading Justifies Government Argument
  87. Government Intervention
    vs
    Government Interference
  88. Bigger Cake = Bigger Slices
  89. Bert Kelly on the Political Process
  90. Charabanc: Part 1
  91. Charabanc: Part 2
  92. Charabanc: Part 3
  93. Relationships with the Liberal Party
  94. Tariffs = High Prices + World War
  95. Bert Kelly's Family History
  96. Bert Kelly's Pre-Parliament Life
  97. Why Bert Kelly was not even more publicly outspoken
  98. WEATHER IS USUALLY UNUSUAL
  99. How to stand aside when it's time to be counted
  100. How the Modest Member went back to being a Modest Farmer
  101. My pearls of wisdom were dull beyond belief
  102. Bert Kelly on Political Football
  103. Ross Gittins Wins Bert Kelly Award
  104. Interesting 1964 Bert Kelly speech: he says he is not a free trader and that he supports protection!
  105. This is the wall the Right built
  106. Has Santa socked it to car makers?
  107. Is the Budget a cargo cult?
  108. Will we end up subsidising one another?
  109. Do we want our money to fly?
  110. Can a bear be sure of a feed?
  111. How to impress your MP -
    ambush him
  112. The time for being nice to our MPs has gone ...
  113. Don't feel sorry for him -
    hang on to his ear
  114. Trade wars can easily end up on a battlefield
  115. Tariffs Create Unemployment
  116. Bert Kelly recommends Ayn Rand
  117. Bert Kelly's Satirical Prophecy: Minister for Meteorology (tick) and High Protectionist Policies to Result in War Yet Again (?)
  118. Bert Kelly in 1972 on Foreign Ownership of Australian Farmland and Warren Truss, Barnaby Joyce and Bill Heffernan in 2012
  119. Parliament a place for pragmatists
  120. Of Sugar Wells and Think-Tanks
  121. Bert Kelly: "I must take some of the blame"
  122. A Modest Farmer looks at the Problems of Structural Change
  123. Government Fails Spectacularly
  124. Know your proper place if you want the quiet life
  125. Bert Kelly on political speech writers
  126. Perish the thawed!
  127. Modest Farmer sees his ideas take hold
  128. Max Newton: Maverick in Exile
  129. Why no-one nails the Big Green Lie
  130. A case for ministerial inertia
  131. Why politicians don't like the truth
  132. Ominous dark clouds are gathering
  133. Better to be popular than right
  134. Crying in the wilderness
  135. Ivory tower needs thumping
  136. Bert Kelly asks, "How can you believe in free enterprise and government intervention at the same time?"
  137. Rural Problems
  138. Unholy state of taxation
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Forbes has long been active in politics, economic education, business and the global warming debate, and was winner of the Australian Adam Smith Award “For outstanding services to the Free Society” in 1986.Powered by Hackadelic Sliding Notes 1.6.5