“You never want a serious crisis to go to waste.” Rahm Emanuel
Finally, Rahm and I agree on something! Unfortunately, we’re going to part ways on the solution to putting the Deepwater Horizon crisis to good use. The Obama administration and the left will argue that the Federal Government needs to interfere more in the operations of oil companies, and needs to toughen environmental standards. I believe that this path lessens the self-interest and responsibility to protect it’s bottom line, and ultimately to protect our environment. Government interference, crony capitalism and the systemic failures it breeds are as much to blame for the spill as British Petroleum.
This episode explains perfectly why the American (and World) population are frequently growing tired of a class of people that say they are all-knowing and yet are all-failing while sticking us with the bill. It’s why the groaning for more personal responsibility is beginning to grow. Let’s start with the Oil spill example.
A core principle of libertarianism is the threat of complete failure and bankruptcy in the free market place. Sheldon Richman in his blog post “Self-Regulation in the Corporate State: The BP Spill” on the Freeman blog states it well:
So: the MMS wanted to regulate, but the industry said it could regulate itself at lower cost, insisting it was a good steward of the environment. This is not to say that MMS was right and the companies wrong. For reasons provided below, government regulation is fatally flawed. Further, this is not just a simple matter of regulation. More fundamentally it’s a matter of ownership. The government has proclaimed itself the owner of the offshore positions where oil companies drill. In a free market those positions would be homesteaded and managed privately with full liability. In the absence of a free market and private property, built-in incentives that protect the public are diminished if not eliminated. Bureaucrats and “political capitalists” are not as reliable as companies facing bankruptcy in a fully freed market.
Richman further explains that BP spent a significant amount of time and money ignoring the safety of it’s workers and Americans and spent it trying to impress regulators. They’ve spent a tremendous amount of money on lobbying and campaign contributions to shield themselves from the true costs of doing business.
Why not cut corners and spare some expense when you can influence the people that will just put a $75 Million liability cap on any major oil spill that you may cause? Don’t politicians and the regulators (that bring in $13 Billion a year for the government) end up having a vested interest in signing waivers to help Big Oil cut some corners to make more profit? Richman states it best:
In this context there’s less to the contrast between government regulation and corporate self-regulation than meets the eye. Self-regulation in a corporate state does not constitute the free market. When companies are sheltered in any substantial way from the competitive market’s disciplinary forces, incentives turn perverse. Moreover, “state capitalism” and the corporate form (pdf) – with its agency problem – can produce the temptation to cut costs imprudently in order to make the next quarterly report look attractive to shareholders.
“Putting profits before people” is a feature of state, or crony, capitalism not the free market.
Commentators like E.J. Dionne are arguing that the free market is what failed us, and we should stop this nonsense and the government should take a heavy hand in preventing these spills. Reason’s Matt Welch counters with a list of continuous and out of control environmental disasters that are under the tight thumb of all-powerful governments. It explains that the folly of the notion that our all-powerful government can save us. Furthermore, the government bans offshore drilling. Should a spill like this occur in more shallow waters, divers could easily “plug the hole.” It shows why we need TRUE regulatory reform.
Total incompetence by those that continually telling us that they know best is at the heart of the tea party movement, and the rapid growth of the LP. Steve Chapman captures this sentiment eloquently in his article “Fouling the Gulf—And Much More.”
BP was drilling for oil at depths that only recently were impossible. The company had solved the puzzle of how to carry out extraction a mile underwater. Unfortunately, it neglected to devise a reliable way to cap an unplanned blowout at that depth. It’s as though the Apollo engineers landed men on the moon without being entirely sure how it would get them back.
So the problem has rapidly expanded, as the smart folks in charge turn out to be not so smart, the government is unable to discharge its obligation and ordinary people who had nothing to do with the failure suffer the consequences. Hubris induced leaders to take big chances without appreciating or preparing for the likely consequences if they turned out to be wrong—which they were, in spades.
This is not a new story but a recurring one. It describes the invasion of Iraq. It describes the failures that led to the destruction of New Orleans after Hurricane Katrina.
It describes the financial crisis that led to the worst economic collapse since the Great Depression. It describes the explosion of the federal budget and the government debt in the last two years.
The aftermath of each event was chaos and pain, which seemed to surprise no one more than the architects of each failure. But the cost of their errors ended up being borne by those beneath them—soldiers in Iraq, homeowners in New Orleans, workers in companies far removed from Wall Street, and taxpayers whose liabilities multiply like rabbits.
Those at the top, by contrast, get off easy. George W. Bush earns $7 million for his memoirs, while Goldman Sachs remains in business, making record profits.
Time and again, we are led into uncharted territory by leaders of one kind or another. We end up wandering in the wilderness while they proceed to the Promised Land.
It’s time for those that ultimately pay the bill to take control. Let’s put this crisis to good use, and explain why we DO NOT have free markets. Let’s explain why true free markets are GOOD. That means less centralized power in the hands of all powerful government entities and crony capitalists. The age of the “Forgotten Man” needs to end. Let’s encourage our friends and neighbors to take control of their lives by taking control of their government.