Lessons from the Chinese Dairy Industry

Embarrassed by the recent infant deaths from melamine-tainted milk, and anxious to put the scandal to rest, the Chinese courts have mandated the execution of the two men judged to be the most egregiously responsible for the problem, and long prison sentences have been issued for 19 others connected to the tragic safety failure. For me, this story has two profound implications, quite unrelated to each other, but both logically flowing from this harsh verdict issued by the Chinese court.

The first lesson, here, is that China takes its public health image very seriously. The last thing China wants is to be seen as a third-world nation when it comes to the health of its citizens. For this reason, the world can expect official China to hide, or minimize, the full extent of the H5N1 (bird flu) outbreak that is taking place there right now. The high mortality numbers that came to light in Germany this week (see yesterday’s blog, 1/22) are probably correct, and may even be lower than what is actually occurring.

Lesson number two from the death penalty verdict in China is that Communist capitalism may have a large competitive advantage over our unfettered free-market capitalism where it’s every man for himself when it comes to responsibility. Starting with Enron's Ken Lay and Jeff Skilling nine years ago, and continuing right up through John Thain in today’s news, American corporate business has seen an unbroken sequence of CEOs exploiting their companies and their employees for their own enrichment, and nothing in the American system alters or impedes this activity. Worse yet, in some circles, CEO excess is actually admired as a sign of success. What we now have is, essentially, a 21st Century feudalism where the working serfs exist to serve the lords. There is no doubt that if Bernie Madoff had pulled his little scheme in China instead of New York, he would be in his grave instead of his $7 million dollar penthouse. The accountability demanded from managers and executives in China is one reason why China will probably leave America in the dust.

Maybe I’m reading too much into this.