Op-Eds Procapitalism, China.

November 20, 2008 ... Safe as Milk.

With the splendour of the 2008 Olympic games and the response to the catastrophe of the Sichuan earthquake to the government's credit, it is another challenge for the Chinese government to come to terms with how to tackle the consequences of the baby milk formula emergency, which has caused so much distress to the children of Chinese parents and to those from export countries.

Safe as Milk was an ironical response to the consequences of radioactive fallout products which contaminated the means of milk production, and contributed to the introduction of Strontium 90 into the human food chain. Which, as an interesting scientific by product, may be an aid to archeologists when dating human remains, as in pre/post the atomic bomb era.

Nevertheless, and being sanguine about 'we are where we are', parents have a reasonable expectation that, the baby milk formula supplied by reputable brands, is safe to feed to their children, and do not have to worry about Melamine levels which can have a dangerous impact on the kidneys and/or lives of their children. Or worry about the baby milk formula having no nutritional value whatsoever, so as to literally starve and/or posion their children to death.

In an effort to thwart future occurrences of such incidents and/or alternative scenarios, it has been demanded that the Chinese government, like its EU and US counterparts, establish minimum quality standards which manufacturers must follow, and which government must police and accredit. Whilst this makes reasonable sense, it is also very bad practice.

This is because the market will be limited to a handful of manufacturers who will enjoy the benefits of a powerful monopoly, which will ensure that the cost of baby milk formula is higher than it should be, and will establish a line of corruption impossible to dislodge. After all, as occurs in the pharmaceutical and healthcare provision industries, in the EU and US, who can argue about having a minimum assurance of quality backed up by the power of government which is accountable to the people.

Unfortunately, in practice, it always means that a minimum standard is never exceeded, and the goods and services are always much more expensive than they would otherwise be, or nonexistent. Which is why the EU and US are financially crippled, and developing countries have to remain impoverished and developing for much longer, if not permanently. It also means that, without government approval, no goods and/or services of a particular type can be made available at better prices and higher quality than the minimum.

For example, A group of private investors may decide to hire their own scientists and establish a laboratory in order to research a new drug, and then have it manufactured by a generic pharmaceutics company in China. But without spending tens of millions on accreditation, the drug would not be allowed onto the market. Thus, it is impossible to compete with the likes of Pfizer, Merck, GlaxoSmithKline, etc., who have the money to squander on accreditation.

The much better way to ensure that milk is safe and drugs and other goods and services are also safe, effective, less expensive and available in the varieties wanted, is to have government more properly enforce the contract between the manufacturer and customer and for manufacturers to be accredited by reputable insurance companies which would have a proper incentive to ensure that what it is insuring is of a high standard with reduced risks, and is not simply a minimum standard with increased risks. Furthermore, there would be greater incentive for manufacturers to promote their products on the basis that their superior standards have value, and are not any more expensive, in the long run.