Money is the root of all evil, or so they say. I'm not one to subscribe to such absolutes. Nevertheless, it is the fuel on which our society -- and all of civilization -- feeds.
But, apes that we are, we do not always choose to spend, save, or invest wisely. Often we will work against our own best interests, favoring short-term gains over long-time costs. The response to the Gulf oil spill is an excellent if horrifying example of such practices.
[I began this as a rebuttal to the rec list diaries about the Eugene Robinson piece, but I don't really want to contribute my yelling to the cacophay already in the comments there. I really don't give a flying fig about whether or not Obama makes the proper angry face, and I have some disdain for those who assume that, because he's the president, he has the power to fix everything. End rant.]
I find it kind of captivating that so little of the commentary seems to focus on the economics of the spill. I am not an economist myself, but what I can claim bragging rights for is training in industrial spending practices. In this training I, and my classmates, were cautioned that an employer (the investor, in this example) will do everything it can to do things on the cheap.
In the several cases in which BP has made this decision and been caught red-handed, the consequences have been costly. But on the occasions when possible disaster does not strike, or when nobody notices, the small savings on that particular investment balloons hugely.
Let's use DH as an example. The findings that have been issued are many, but let's focus on the cementing around the blowout preventer. BP pressured Halliburton to finish the job quickly. Halliburton, likely being paid under a fixed-price contract, had no incentive to care if the shortened timeline meant a sacrifice in product quality. BP, looking at the big rental price tag of the drilling rig, its daily employee wages, material and operations costs, had major incentive for pushing the timeline. The chance of the cement failing, they assumed, was small enough that the potential payout - and existing payout from other projects - would cover such a failure. This in itself is not a particularly evil assumption. Every machine or apparatus has the potential to fail, and this is typically why engineers insist on backup equipment, redundant control systems and other safety measures. But again, these systems cost money, and it is generally in the control of management whether or not these systems are ultimately implemented. If this chance is not high, and/or if the investment cost of redundant systems too great, management will rule in favor of the riskier configuration. Government fines for safety violations usually don't even factor in, if guidelines for them exist at all.
In short, there is no powerful incentive in our current free-market system to keep companies from cheapening out.
BP's various major accidents have landed it with some of the worst fines on a single incident, in any industry in the US. The 2005 Texas City explosion still tops the list. So why did that giant fine fail to scare BP into implementing a better safety program? Because doing it more cheaply gained them better profits, which more than made up for that fine.
Conservatives like to whine about how the free market is capable of policing itself, and that regulations are burdensome. These two arguments seem contradictory; if a company like BP regulated itself, it would be the same burden as the government would have otherwise imposed. Regulations are not arbitrary; they are designed to protect people and the environment, something that large companies usually have no incentive to do.*
Furthermore, we've seen demonstrated pretty irrefutably by this unfolding disaster that the theory of self-regulation can fail spectacularly. The reason why is simple: it's a conflict of interest. Free-markets result in greater profits. Regulated markets result in smaller, or even zero profits. The whole purpose of a capitalist system is to create big profits.
Conversely, the most popular theories of government rely on the assumption that governments 1) DON'T make profit and 2)can operate on very small funds. This is the whole principal behind giant tax cuts, budget reductions and a shrinking federal workforce. This is where we get a little into the arguments I was seeing about Eugene Robinson's piece.
Why doesn't the government do more? The simple answer is that it can't. The government doesn't have a big slush fund or a lot of reserve manpower to draw from to just jump into a giant oil spill and start slurping, sieving, shoveling and booming away. The Cost Guard has a large roster of other things on its plate, and many of these projects cannot simply be abandoned in a short time frame. The number of regulators it would take to do a comprehensive review of BP's practices, let alone all the other companies', simply doesn't exist. The Chemical Safety Board, which is the agency that investigates such accidents, has between 30-50 employees total, for the whole United States. Their budget, obviously, is pretty fixed.
Most government agencies receive a fixed budget; Congress assesses and approves them. These agencies must sometimes make very difficult choices about how to allocate these funds. Faced with the choice of putting that money toward a known, evaulated project and an unknown, unlikely event, these agencies will put the bulk in the former. And often enough, the money still isn't adequate.
As Americans, is this how we want our country to function? Do we want our government to be impotent, relegated to the status of the homeless person washing windows at highway on-ramps, hoping for spare change? Do we want gigantic coporations to handle the massive conflicts of interest that accompany the theory of free-market sef-regulation? The alternative, of course, is likely to result in higher taxes... but maybe not. If we keep levying huge fines against misbehaving companies, that money goes to the government, and funds the regulators. I do not have the necessary insight into the situation to tell you if that would be adequate, but it would certainly soften the blow to taxpayers.
Government can work. I'm not nieve enough to say that it always works, but if you want examples of highly regulated capitalist societies that manage to treat the public and the environment with respect while maintaining their citizen's rights and monitary system, you need only glance across the pond. Actually, both ponds.
This experiment in free-market chaos needs to end.
* I could get further into the reasons why the windsock of public opinion isn't a big incentive, but I don't want to drift too off-topic. To be brief, there are many examples of how propaganda can be incredibly successful, and big corporations with endless monitary resources are, by natural law, better at it than advocacy groups. And, of course, the public doesn't vote for corporations' boards of directors, a luxury not awarded to our friends in Congress and the White House.