Thursday, 16 March 2017

When Scepticism is Healthy

Fraud, Corruption and Business Interests

Adam Smith, the Scottish "free-trader" was deeply sceptical about the ethics of capitalists, or businessmen, or merchants.  Not that Smith fell into the ideological trap into which Marx and Engels and subsequent Marxist ideologues fell headlong.  With herd instinct, the Marxists trumpeted the moral purity of the proletariat, the working class, while they excoriated the capitalist class.  This euphoria over the moral purity of the proletariat lasted until Marxists assumed control of the regime. Then, overnight, the prols became cannon fodder, subject to oppression and torture.

Smith was more influenced by his Christian heritage.  He believed in the ubiquity of sin, greed, and selfishness, throughout all mankind, not just the capitalist or merchant classes.  His "solution" to the greed, which led to lying, deceit, manipulation, and extortion amongst businessmen and people of property, was to recognize that the free market--the free exchange of goods and services--was a wonderful discipline upon capitalists.  The reality is that capitalists hate competition for themselves, but wish it to be the grand reality for everyone else.  Smith said that if you left capitalists alone in a room for twenty minutes they would have come up with all sorts of schemes to reduce competition, control supply, and jack up prices.  In other words, they would quickly come up with schemes to defraud.  If the free market were to work properly, Smith knew that fraud in all its forms must be policed and punished.

His advice was never to trust a man of property further than you could throw him.  Self regulation of capitalist groups would always be a joke.

Consequently, it comes as no surprise that some nefarious egg producers in New Zealand have been conspiring against the public, their clients, the better to line their pockets.  They have been purchasing cheap eggs laid by caged, battery hens--regarded by many as the epitome of animal cruelty--and passing them off as free range eggs, laid by free range hens--which, of course, command a much higher price in the shops.
Countdown has removed a brand of free-range eggs from its shelves following claims that many are in fact cage-laid eggs.  The Serious Fraud Office is investigating the allegations but cannot say how long its inquiries will take.  An investigation by website Newsroom concluded that millions of Palace Poultry eggs labelled as free-range and sold at Countdown stores before this year were likely to have been falsely marketed as free-range.  The supermarket chain said it had removed all Palace Poultry products from its shelves and informed the company. [RNZ]
This is straight up and down fraud.  Hence the involvement of the Serious Fraud Office.

The egg producing industry in New Zealand is dominated by some big corporates.  There are market dominant players, who cannot be trusted to act honestly. They have been in Adam Smith's back room too long.  Self-regulation in such circumstances is a joke, which would elicit nothing more than a cynical guffaw from Smith.

There may be some signs of new strictures and disciplines, apart from the involvement of the Serious Fraud Office.  The supermarket chain, Countdown is part of a duopoly in New Zealand.  It has only one large competitor.  But increasingly, both in New Zealand and Australia, the regulators are turning up the heat.  They have fraud by corporates both large and small in their sights--particularly when industries are dominated by a small coterie of large players.  Adam Smith would have applauded.  One of the first consequences is that the players themselves start to act more like honest citizens.  So, Countdown says it is going to engage its own independent investigator.  It has decided it is in its best commercial interests to take the high moral ground.
Countdown said it would bring in an independent third party to review the traceablility of all free range and barn egg suppliers. [RNZ]
Good. We will watch with interest to see whether this is to be genuine, or just a PR stunt.  When dealing with capitalists and merchants, "trust but verify" is a fundamental maxim.  Adam Smith would have everyone keep in mind the picture of his dark room, curtains drawn, where industry dominant capitalists conspire together to deceive and mislead customers and investors.  It is theft, plain and simple.  It inevitably happens if naively ignored.

Do such dark rooms exist?  Sure.  In this case one of them is called the Egg Producers Federation of New Zealand.

If we arrest and punish pickpockets, how much more must we arrest, fine, and, imprison business owners and interests conspiring against customers, lying to them, deceiving distributors, and selling falsehoods.

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