Bryce Edwards ' Opinion

Bryce Edwards is a lecturer in Politics at the University of Otago.

Bryce Edwards: The ideological basis of the 'Fonterror' scandal

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Fonterra is coming in for a huge amount of criticism from everywhere. Photo / NZH
Fonterra is coming in for a huge amount of criticism from everywhere. Photo / NZH

Was the Fonterra milk scandal caused by New Zealand being 'hostage to a blinkered devotion to laissez-faire market ideology'?

That's the suggestion being made by China's state news agency, Xinhua - see the editorial published in China Daily: New Zealand needs to start building trust in the long-term.

This is an important and highly critical analysis of New Zealand's politics and economy. It's important because it is indicative of the official Chinese state view on the Fonterra scandal. The column, possibly written by Chinese diplomats in Wellington, strongly criticises the New Zealand Government's hands-off approach to industry and the economy, and berates the country for it's opportunistic attitude to exporting, in which little attention is apparently given to quality. New Zealand's '100 per cent pure' branding also comes into question with the suggestion it has become a 'festering sore'.

For these reasons, the milk scandal is increasingly being labeled the 'Fonterror' scandal.

Business writer Pattrick Smellie has responded to the critical Xinhua column, admitting, 'Annoying as it would be to be lectured by a one-party state with enough skeletons in its own closet to sink a ship, on this point, they could just be right'. He also draws a link to the Pike River inquiry report which came out last year and concluded that New Zealand's deregulated ideology was a major cause of the disaster - see: Is this a Pike River moment for food safety?

Vernon Small has also responded to the Xinhua arguments, asking: 'Is China taking opportunistic advantage of the situation to whip up opposition to imported milk powder, seen as safer and of higher quality, to boost its own domestic dairy industry? It was hit badly by the melamine scandal. It would be no surprise' - see: Fonterra reeling from intense media scrutiny.

The Xinhua column is also nicely lampooned by Ben Uffindell on The Civilian - see: Chinese media says problem with New Zealand economy is that it isn't ruthless dictatorship. And John Minto elaborates on the themes of the Xinhua analysis in his blogpost All our eggs are in one breakable basket.

To get another sense of how strongly the local Chinese embassy is feeling about the scandal, read Claire Trevett's Sri Lanka suspends NZ milk powder imports. She quotes the embassy's Zhang Fan as saying 'Fonterra is your largest company, so a lot of Chinese consumers are consuming their products. This kind of incident, one after another, certainly has shaken their belief in Fonterra. Previously, in a lot of Chinese consumers' minds, New Zealand was a clean, pure place in terms of food safety record. But now, bad things just happen again, again and again'.

What's been especially interesting about the crisis is to see just how 'hands on' the Government has been. As one commentator has said, 'The sight of a National government sending officials into a large private company to tell them how to do their job wasn't one I ever thought I'd see'.

As is usual in such crises, there is a strong demand to keep politics out of it. But that's always impossible, or at least naïve. There is no doubt that ideology is at play in every aspect of the scandal. Some of this is covered very well in Colin Espiner's latest column, Mr Fixit in charge of dairy scare. Espiner has a number of highly-ideological questions for the various participants: 'to Fonterra (what the hell were they thinking?), to the Government (was light-handed regulation, so in vogue in the 90s, a terrible mistake?), to the wider industry (is a single dairy marketer really such a good idea?) or to the general body politic (are we too reliant on dairy altogether?)'.

There are also political questions about how the scandal will impact on parliamentary politics, which are best answered by John Armstrong in: Government deals with scare. He suggests that the Government will receive public kudos for its handling of the affair because, 'John Key, Tim Groser, Steven Joyce and other Cabinet ministers have provided a textbook example of how to handle a crisis. Their competence has been further highlighted by Fonterra's gaffes and atrocious public relations'. And not only has the scandal managed to helpfully overshadow the GCSB problems - also nicely parodied by Ben Uffindell in Experts say only thing botulism kills is spying scandal - it is something that voters really care about. Therefore, according to Armstrong, 'When election day rolls around in November next year, National's ability to win enough seats to stay in power will hinge on voters' impressions of how it has handled the things that matter to the average punter - things like preserving our dairy export markets. Not Dunne's emails'.

Labour has, so far, treaded carefully on the issue, not wanting to be seen as politicising it. Eventually this approach will end. And Vernon Small suggests in his column today (Fonterra reeling from intense media scrutiny;) that Labour might be 'spoiling for a fight with Fonterra'. Small says, Labour 'has already taken on the level of tax paid by farmers, and leader David Shearer signalled in the House this week that Fonterra was "not bigger than Parliament". Labour will be in power some time, and Fonterra might like to think of how it will handle that. There is a sense within Labour that its spokesman, Damien O'Connor, has not been treated well by the industry and that Fonterra in particular has been arrogant towards him and the party. He has already fired a warning about the extent of self-regulation in the sector'.

The bi-partisan approach has already 'soured faster than a glass of milk in the hot sun' according to John Armstrong - see: National interest takes second place. He explains why Labour is quickly politicising the scandal: 'Labour remembers how it was shut out of media coverage for weeks in the aftermath of the February 2011 earthquake in Christchurch, while National, as the governing party, hogged all the attention for itself. Labour appears to have decided it cannot afford a repeat of that episode'.

Fonterra is, of course, coming in for a huge amount of criticism from everywhere. The single most critical item in the media has been Andrea Fox's Fonterra getting too big for its gumboots. Fox, a farming writer, outlines the problems with New Zealand's largest company (which 'owes its nearly 90 per cent dominance of the dairy industry to special legislation') and questions the very existence of the exporter: 'It's time to ask if opponents of the 2001 legislation that enabled Fonterra's creation were right. They wanted two big companies so Fonterra had competition. So New Zealand didn't put all its eggs in one basket with the whole economy threatened if someone dropped it. It is time to ask if Fonterra's size makes it vulnerable to systemic problems like an overlooked dirty pipe. And it is time to ask if Fonterra's size has bred a culture of arrogance and a sense of entitlement to decide it knows best what is good for us to know'.

Leftwing blogger Josie Pagani thinks likewise, arguing 'it can't be trusted with the crown jewels. The company needs to be broken up and its decade-long privilege withdrawn. Let's have multiple dairy export co-operatives, and spread the risk instead of being held hostage by a company with a sense of entitlement and a culture of hiding when things get tough' - see: Three strikes and you're out, Fonterra. See also, Alan Barber's Fonterra's problem ought to make those calling for one mega meat company hesitate for a moment.

It's Fonterra's communication - or lack thereof - that has alarmed most commentators. For example, for a discussion of Fonterra chairman John Wilson's public no-show, and the call from Federated Farmers for him to resign, see Gerald Piddock and Andrea Fox's TV spot for Fonterra bosses. But it seems unlikely that Fonterra will be passing brown paper envelopes full of cash to New Zealand reporters, as it did in China this week - see Malcolm Moore's Fonterra chief feels the heat but keeps critics at bay.

It's not just Fonterra coming in for criticism. The Government's performance has not met with universal acclaim. Has its performance in the scandal really been that impressive? The Press suggests not, in its highly critical editorial, Fonterra harms itself and NZ. The key part is this: 'The Government also emerges as having spilt the milk. That it was not informed of the contamination until last Friday shows that it had poor protocols with Fonterra. It evidently did not have an understanding with the corporation that developments importantly impinging on exports would be promptly and comprehensively shared, which is astonishing considering the potentially damaging issues involved'. Other similarly critical questions are being asked in the Herald editorial, Harm done to NZ requires full answers.

According to Rosemary McLeod, the blame can be spread even wider. It's not just Fonterra, nor the Ministry of Primary Industries, but a whole corporate climate that is running roughshod over the proper ways of doing things - see: Lofty views obscuring real detail. In particularly McLeod points out the environmental consequences of how things are currently being managed: 'Currently, 92,000 New Zealanders drink dirty water, compared with 72,000 two years ago, which was bad enough. The reason is bound to be linked to our 6.4 million dairy cattle, more than twice as many as 24 years ago, all of them producing cowpats, and many of them near waterways. We allow this, and farmers argue the toss, because cows make so very, very much money, which makes polluted water very, very worth it - until something bad happens. That's the way we do things. Think Pike River and leaky homes'.

Others are stressing that the economic lesson to come out of the Fonterra scandal is that New Zealand needs to diversify - this is best put today by Paul Brislen in his column, End unhealthy reliance on dairy giant.

Finally, to see how the international media is covering the crisis, the best place to go is Toby Manhire's constantly-updated Listener page, NZ baby formula botulism scare: global media coverage. And for more aggregation, see my two blogposts, Top tweets about Fonterra's botulism milk scandal and Cartoons about Fonterra's botulism milk scandal.

- NZ Herald

Bryce Edwards

Bryce Edwards is a lecturer in Politics at the University of Otago.

Bryce Edwards is a lecturer in Politics at the University of Otago. He teaches and researches on New Zealand politics, public policy, political parties, elections, and political communication. His PhD, completed in 2003, was on 'Political Parties in New Zealand: A Study of Ideological and Organisational Transformation'. He is currently working on a book entitled 'Who Runs New Zealand? An Anatomy of Power'. He is also on the board of directors for Transparency International New Zealand.

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