"Ain't it funny the way a mind works?" he would say, as he looked up from the newspaper, his thick eyeglasses having slipped way down on a bulbous nose. That oft-repeated comment of my Uncle Frank's, who though unlettered, was wise and well-versed in the university of hard knocks, was quickly followed by some great insight into the world's problems.
That saying of his, came to me this morning as I read two stories in the newspaper, one lamented the lack of regulations which led to our recent financial crisis, and the other reported on the scarcity of oversight which appears to have caused and abbetted the Chinese melamine scandal. Somehow their juxtapositon made me think of the problem of overpopualtion in the deer herd on Shelter Island's Mashomack Preserve. "Aint it funny the way a mind works?" What is that relationship? In all three cases, the problem revolved around the lack of needed regulation.
Shelter is located on the eastern end of Long Island, nestled in between the two forks. The eastern one-forth of the five-mile-wide island is occupied by the Nature Conservancy's wild and forested Mashomack Preserve. I spent a number of happy summers there studying and helping to document the archaeology of that place, and in the process got to know the wildlife and the forest quite well. At that time, in 1980s, the deer population on the preserve, was growing like a Wall Street "dot.com" bubble. The out-of-control herd ate just about everything in their path, consuming the forest upon and within which they lived. Naturally, in a forest preserve no hunting was allowed, and with no natural predators, there were no controls on their population. By eating the tender young tree-shoots, which were needed to replace the dying older trees, they were effectively eating themselves out of existence and devastating an ancient and pristine forest. Mike Laspia, the wise preserve manager resolutely faced up to his superiors to convince them that a control system (hunting) was needed to bring the herd back into balance with its food supply. Hunting in a nature preserve? Yes! Hunting is as abhorrent to the conservancy staff as financial regulators are to a Wall Street tycoons. But regulation of the herd by hunting was a necessary evil. It solved the deer problem, and today Mashomack has both a healthy deer herd as well as a healthy forest.
On the last day of 2008, the NY Times ran a story on the front page: "Former Head of Chinese Diary Pleads Guilty of Scandal" (David Barboza, NYT December 31, 2008 http://www.nytimes.com/2009/01/01/world/asia/01milk.html?_r=1&hp)
Tian Wenhua,is the former director of Sanlu Corporation of Shijiazhuang City in the northern province of Hebei. Ms Wenhua is one of the highest corporate executives ever to go on trial in China. Wenhua, 66 years old, is accused of knowingly selling contaminated baby formula from May 2008 to September of that year when the company she managed finally stopped production at the urging of its subsidiary in New Zealand. In the end it was necessary to issue a recall of some 900 tons of contaminated baby formula it had produced. The adulterated formula was found to have a concentration of the poisonous adulterant known as melamine at more than 100 times the concentration allowed.
In response to the scandal, and prior to the Sanlu trail, (which focused only on local officials), several high-ranking Shijiazhuang government officials were fired and the head of the Chinese product-safety watchdog group, the General Administration of Quality Supervision and Quarantine had been forced to resign. In addition, fifteen other dairy middlemen in Hebei province were charged in the scandal. In 2007, after an earlier product scandal, China's State Food and Drug Administration head-regulator faced execution after he was found guilty of corruption and dereliction of duty. A similar fate may be in store for Madam Tian.
The damage to the Chinese food industry has been enormous and one wonders will the struggling dairy industry be able to recover? In fact, reports from Beijing, indicate that Chinese food exports in October, (after the scandal) were down by 13% over the September level. (See http://news.jongo.com/articles/08/1219/167638/MTY3NjM4e0KqXWDB.html)
One does not know how or when recovery will occur, however, we can pinpoint the cause: lack of proper oversight and regulation.
Reading between the lines, one can imagine how problems of weak regulation might occur in a rapidly growing and expanding new economy. Perhaps all the necessary pieces of the oversight and regulatory system could not have been foreseen and others were not in place when an industry grows to a point at which control is necessary or critical. Furthermore, when a local industry generates enormous profits and full employment, senior officials are loath to interfere. Hard-nosed types that might be tempted to blow the whistle on a potential scandal might be dissuaded by threats, bribes or other forms of coercion.
On the other hand, in the case of Wall Street collapse, and the sub-prime loan mess of late 2008, exacerbated by the Mardoff scandal, we can clearly lay the blame as well to a lack of oversight and regulation. In the US case, the failure of regulation was due to the faulty ideology and political philosophy of Republican government leaders. The Bush Administration lauded and advanced deregulation wherever it could, and viciously cut the knees out from under any honest and effective overseers. Existing legislation, some which had been drafted as long ago as the 1930s, was purposely emasculated to enable a "freeing up" the market. In the amount of damage done and the financial evil unleashed, the Wall Street collapse was far worse than what has been revealed in the China dairy and food scandals. But the underlying causes were the same...unrestrained greed and excess and limited or ineffective regulation and control. And in both cases, the industries affected were irreparably harmed. Apparently from what we have learned so far, the Chinese perpetrators were (or will be) treated harshly when caught, execution, life in prison. Our Wall Street perps were handed money, permitted to keep their golden parachutes, and let off the hook.
So as in controlling the deer herd on Shelter Island, modulating greed and profiteering in China's dairy industry, and reining in similar motives in our financial system, effective and fair regulation is necessary to keep the natural systems healthy, to generate a robust financial system and a profitable Chinese dairy industry. In the past, the old Republican mantra, "deregulate, deregulate" repeated over and over by right-wing politicians from Goldwater in the 60's to Reagan, and finally to George Bush in this century. Thankfully (though at great cost) the Republican financial philosophy has now been thoroughly tested and fully repudiated. One only has to look at the examples above: the Melamine scandal and the American credit collapse to fully understand the real need for appropriate controls and regulation. Like a healthy deer herd needs effective controls so does our economy and industries. Without them, as with the Mashomack deer herd, we may run the risk of destroying the very system on which we live and survive.
Let's get that straight for the new year.
Shelter is located on the eastern end of Long Island, nestled in between the two forks. The eastern one-forth of the five-mile-wide island is occupied by the Nature Conservancy's wild and forested Mashomack Preserve. I spent a number of happy summers there studying and helping to document the archaeology of that place, and in the process got to know the wildlife and the forest quite well. At that time, in 1980s, the deer population on the preserve, was growing like a Wall Street "dot.com" bubble. The out-of-control herd ate just about everything in their path, consuming the forest upon and within which they lived. Naturally, in a forest preserve no hunting was allowed, and with no natural predators, there were no controls on their population. By eating the tender young tree-shoots, which were needed to replace the dying older trees, they were effectively eating themselves out of existence and devastating an ancient and pristine forest. Mike Laspia, the wise preserve manager resolutely faced up to his superiors to convince them that a control system (hunting) was needed to bring the herd back into balance with its food supply. Hunting in a nature preserve? Yes! Hunting is as abhorrent to the conservancy staff as financial regulators are to a Wall Street tycoons. But regulation of the herd by hunting was a necessary evil. It solved the deer problem, and today Mashomack has both a healthy deer herd as well as a healthy forest.
On the last day of 2008, the NY Times ran a story on the front page: "Former Head of Chinese Diary Pleads Guilty of Scandal" (David Barboza, NYT December 31, 2008 http://www.nytimes.com/2009/01/01/world/asia/01milk.html?_r=1&hp)
Tian Wenhua,is the former director of Sanlu Corporation of Shijiazhuang City in the northern province of Hebei. Ms Wenhua is one of the highest corporate executives ever to go on trial in China. Wenhua, 66 years old, is accused of knowingly selling contaminated baby formula from May 2008 to September of that year when the company she managed finally stopped production at the urging of its subsidiary in New Zealand. In the end it was necessary to issue a recall of some 900 tons of contaminated baby formula it had produced. The adulterated formula was found to have a concentration of the poisonous adulterant known as melamine at more than 100 times the concentration allowed.
In response to the scandal, and prior to the Sanlu trail, (which focused only on local officials), several high-ranking Shijiazhuang government officials were fired and the head of the Chinese product-safety watchdog group, the General Administration of Quality Supervision and Quarantine had been forced to resign. In addition, fifteen other dairy middlemen in Hebei province were charged in the scandal. In 2007, after an earlier product scandal, China's State Food and Drug Administration head-regulator faced execution after he was found guilty of corruption and dereliction of duty. A similar fate may be in store for Madam Tian.
The damage to the Chinese food industry has been enormous and one wonders will the struggling dairy industry be able to recover? In fact, reports from Beijing, indicate that Chinese food exports in October, (after the scandal) were down by 13% over the September level. (See http://news.jongo.com/articles/08/1219/167638/MTY3NjM4e0KqXWDB.html)
One does not know how or when recovery will occur, however, we can pinpoint the cause: lack of proper oversight and regulation.
Reading between the lines, one can imagine how problems of weak regulation might occur in a rapidly growing and expanding new economy. Perhaps all the necessary pieces of the oversight and regulatory system could not have been foreseen and others were not in place when an industry grows to a point at which control is necessary or critical. Furthermore, when a local industry generates enormous profits and full employment, senior officials are loath to interfere. Hard-nosed types that might be tempted to blow the whistle on a potential scandal might be dissuaded by threats, bribes or other forms of coercion.
On the other hand, in the case of Wall Street collapse, and the sub-prime loan mess of late 2008, exacerbated by the Mardoff scandal, we can clearly lay the blame as well to a lack of oversight and regulation. In the US case, the failure of regulation was due to the faulty ideology and political philosophy of Republican government leaders. The Bush Administration lauded and advanced deregulation wherever it could, and viciously cut the knees out from under any honest and effective overseers. Existing legislation, some which had been drafted as long ago as the 1930s, was purposely emasculated to enable a "freeing up" the market. In the amount of damage done and the financial evil unleashed, the Wall Street collapse was far worse than what has been revealed in the China dairy and food scandals. But the underlying causes were the same...unrestrained greed and excess and limited or ineffective regulation and control. And in both cases, the industries affected were irreparably harmed. Apparently from what we have learned so far, the Chinese perpetrators were (or will be) treated harshly when caught, execution, life in prison. Our Wall Street perps were handed money, permitted to keep their golden parachutes, and let off the hook.
So as in controlling the deer herd on Shelter Island, modulating greed and profiteering in China's dairy industry, and reining in similar motives in our financial system, effective and fair regulation is necessary to keep the natural systems healthy, to generate a robust financial system and a profitable Chinese dairy industry. In the past, the old Republican mantra, "deregulate, deregulate" repeated over and over by right-wing politicians from Goldwater in the 60's to Reagan, and finally to George Bush in this century. Thankfully (though at great cost) the Republican financial philosophy has now been thoroughly tested and fully repudiated. One only has to look at the examples above: the Melamine scandal and the American credit collapse to fully understand the real need for appropriate controls and regulation. Like a healthy deer herd needs effective controls so does our economy and industries. Without them, as with the Mashomack deer herd, we may run the risk of destroying the very system on which we live and survive.
Let's get that straight for the new year.
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