April 7th 2001

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Articles from this issue:

CANBERRA OBSERVED: BHP goes offshore as Australia goes broke and ill

EDITORIAL: IMF or UN intervention - what's the difference?

New Zealand sets up a People's Bank

BRITAIN: Foot and mouth: the real costs

Straws in the Wind

QUEENSLAND: Horan has the hardest job in Queensland

DRUGS: Beazley's drug policy: more of the same



TRADE: Europe's Common Agricultural Policy flourishes

ECONOMICS: The Aussie peso is dropping; but so is the penny


COMMENT: Islam and the West

BOOKS: 'Damaged Men: The Precarious Lives of James McAuley and Harold Stewart', by Michael Ackland

BOOKS: 'LIFE IS A MIRACLE: An Essay Against Modern Superstition', by Wendell Berry

BOOKS: King's servant: 'David Collins: A Colonial Life', by John Currey

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Foot and mouth: the real costs

by Patrick J. Byrne

News Weekly, April 7, 2001
Was the deregulation and consolidation of British agriculture over the past 20 years really cost-effective? Did the economic efficiencies the deregulators imposed on farmers - fewer abattoirs, bigger farms, protein and growth hormone feeding - led to real long-term cost savings greater than the cost of cleaning up the mess of mad cow disease and foot and mouth disease?

Mad cow disease has not only cost farmers, it has cost human lives. It seems not to be a virus or a bacterium but a deadly protein that is very difficult to detect in an infected animal or person. So little is known about the disease that its human toll may be measured in the hundreds or in the hundreds of thousands, as it works its way through the British population over the next 40-50 years.

Animal feed

The disease is the result of feeding animal protein to cattle. Along with hormones, such a diet is an "efficient" way to stimulate rapid growth in cattle and get them cheaper to market.

However, the feeding of animal protein to cattle goes against the biological nature of grass-eating animals, and when the regulations and inspection regimes are relaxed such that unsterilised animal product ends up in feed, it can result in mad cow disease in cattle and the incurable Creutzfeldt-Jakob's disease in humans.

Regarding foot and mouth disease, the UK Centre for Economics and Business Research has estimated that the outbreak this year will cost farmers $10 billion in lost output, and the tourist industry $21 billion. Such estimates assume that the rate of new infections will stabilise as of March. Yet government officials have admitted that the disease may be out of control until the end of the year.

The consumption of beef and related products has declined 25 per cent in Europe as a result of these diseases. The EU has bought two million head of stock in order to stop a devastating collapse in prices.

For this reason, it is not certain that the EU will increase its beef intake quotas for Australia, even if we are able to supply clean, grass-fed beef to their consumers. In fact, importing more Australian beef into Europe could worsen the situation, oversupplying a market of highly suspicious consumers and further reducing the price of beef.

In the short-term it will probaby give Australia greater access to other markets as countries restrict European and Argentinian imports, but that is no reason to rejoice given the devastating effect it would have if it entered Australia.

As explained in News Weekly (March 24), foot and mouth was a disease waiting to happen in the EU, due to wholesale deregulation that emasculated quarantine standards; the inability of individual countries in the EU to apply quarantine rules on imports from other EU countries, even if the product was originally sourced from outside the EU; and competition between supermarkets pushing farm costs down, sourcing product at the cheapest cost around the globe, further compromising safety and quarantine standards.

The question any "rational" economist, who was game enough, should be asking is: in a proper long-run cost-benefit analysis, have the benefits of cheaper food resulting from deregulation and consolidation really outweighed the clean-up costs of these diseases to the economy?

Politically, the current outbreak has created a revolt in rural areas, where farmers incomes had already declined by 60 per cent between 1995 and 1999. Unfortunately, farmers are so small a group now in the UK that they hold little electoral clout. Indeed, as the political balance of power has shifted enormously in favour of the cities, governments now are less aware of the needs and the importance of agriculture than they were 50 years ago, and consumer pressure for cheaper food has provided impetus to the ideological push for deregulation and consolidation.

Foot and mouth is one of the most contagious diseases known. It belongs to the class of viruses that includes cold and polio viruses. During the replication process, the virus can mutate either into a weaker strain that just dies out, or into a stronger virus that is more virulent.

Part of the reason for its recent rapid spread is that the Type O PanAsia version of the disease is far more virulent than any form seen before.

The new strain first appeared in Thailand and Cambodia in January 2000. It spread to Malaysia and Taiwan within weeks and then into South Korea, which had been free of the disease since 1934. Contaminated Korean straw carried the disease into Japan for the first time since 1908.

By Easter, Russia's eastern provinces reported their first cases, and the disease moved west to Tajikistan by August.

In the Middle East, the first cases were reported in Turkey also in January last year, then spread to the United Arab Emirates and Iran by May.

The disease arrived in Greece by July. By September, the virus leapfrogged to South Africa.

The new strain has hit 14 countries in 14 months. Of the world's seven continents, only North America, Australia and Antarctica are currently free of the virus.

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