Governments in most places
want to help citizens who struggle to make a living. Thailand is no exception.
The law of unintended consequence unfortunately comes into play when government
policy attempts to control market forces. Greed is a bulldozer that ploughs
through Wall Street, it also rolls through the rubber plantations and rice
fields of Asia.
In the South of Thailand
there are many rubber plantations. Rubber trees require fertilizer. The
essential ingredient of fertilizer is? One assumes it is poo. The people who
make fertilizer, like all good capitalize, seek to maximize their profits from
every bag of fertilizer. If this becomes a highly regulated business where the
government sets the price, then one way to boost the profits is to sell the
farmers “fake” fertilizer. It is difficult to believe that there are cheaper
substitutes for poo but apparently that is the case.
What the English language
newspapers in Thailand fail to say is the “fake” fertilizer story has shit
hitting the fan in more than one ASEAN country. What seems to be an eccentric
story from Thailand is actually a story that is spreading through the region.
America had the subprime mortgage meltdown in 2008, while Asia has a subprime
fertilizer story in 2012.
Vietnam also has bad boys diluting the
fertilizer in their country. In Vietnam, test showed rather than 20% of organic
content, the fertilizer has less than 15%. What’s a farmer in a remote area
without testing to do? That’s the problem. Remote areas where the fake
fertilizer is used won’t really know the problem until their crop yields tell
them. The Vietnamese authorities responded with a crackdown, raiding five
companies selling the fake shit. But with light fines on the light side, the
crackdown won’t solve the problem. The Vietnamese solution is for the State to
get into the shit business. They’re building a huge fertilizer factory. I am
certain we can revisit this story in a couple of years to see just how well that
Not to be left out of the
biggest shit story to hit the region in years, the Philippines is also
investigating fake fertilizer in Mindanao. The police seized thousands of bags
of fake ammonium sulfate, ammonium phosphate, urea, muriate potash, and
monosodium sulfate salt. This happened after the cops found the safehouse where
the fake fertilizer gang had warehouses.
“The suspected leader of the gang, Edgar Calledo, and seven of his workers were
caught mixing, rescaling, and resacking of suspected adulterated fertilizer
products inside a warehouse in Maa, Davao City.”
They were caught
red-handed. It would be good if the local reporters kept us informed about the
trial of that gang of corporate thugs. How this is any different than the
average derivative trader on Wall Street would require a separate essay. But I
am certain by now you can see the general theory is roughly the same. Only on
Wall Street, they mixed shit in with the good stuff, while in this region, to
save on the cost of shit, they put in the fake stuff.
The problem can be traced
to government capping the price of fertilizer. That is called price control. It
means that to keep farmers and producers of agricultural products contented
voters, the price of shit has to be kept below market price. If the manufacturer
is a state enterprise, then the taxpayers subside the true cost of shit. But if
the price control is on private manufacturer, and the cost is rising, you
would expect one of two outcomes: (1) the use of fake materials that cost much
less; or (2) a refusal to manufacture and sell their product at the controlled
price. The first is fraud, the second is civil disobedience.
According to the Nation, in Thailand, fertilizer
producers and retailers have put the government on notice they won’t be selling
any more of their shit under the government’s current price structure. The
national stocks of fertilizer are dwindling. The government is looking to import
fertilizer from Malaysia to fill the gap. The government is caught between
farmers who want cheap fertilizer and fertilizer companies that want a
profitable return on their investment.
The lesson is that even
shit has a market price and when the government policy is the private sector has
to bear the cost of production even though this not only wipes out their profit
margin but puts them in a loss position, something has to give. The
alternatives aren’t pretty: fake fertilizer, fraudulent fertilizer gangs, black
market fertilizer, and damaged crop yields.
Wall Street bankers and
Southeast Asia fertilizer manufacturers have more in common than anyone would
have thought. They could recruit from the same pool of executives who know the
best techniques of getting people to believe that a little fake shit doesn’t
spoil the crop yields.