home Current Affairs, Economy, Environment, North America Oil spills and economic crises: once more, with feeling

Oil spills and economic crises: once more, with feeling

A clip on Rachel Maddow’s show Thursday showed that the oil leak still pouring into the Gulf of Mexico bears an uncanny resemblance to one from 1979. Each one of the failed containment plans (top hat, top kill and junk shot) was tried unsuccessfully in 1979; indeed, both platforms were owned by the same company–Transocean Ltd. Maddow points out that only relief wells eventually plugged the 1979 leak.

Yet the oil spill also obliquely recalls in form the global financial crisis of 2008. In particular, it demonstrates the inability of lawmakers to learn from the mistakes that lead to the crisis.

The first repetition is the unwillingness of American lawmakers and regulatory bodies to regulate private industry. The beginnings of the economic crisis undoubtedly lie in the easing of banking restrictions by Congress in 1999, and the subsequent failure to regulate the arcane and risky derivatives market. Similarly, the Deepwater Horizon was given a “categorical exclusion” from the National Environmental Policy Act.

As Alternet reports:

In addition to choosing a cheaper — and less safe — casing to outfit the well that eventually burst, the company chose not to equip Deepwater Horizon with an acoustic trigger, a last-resort option that could have shut down the well even if it was damaged badly, and which is required in most developed countries that allow offshore drilling. In fact, BP employs these devices in its rigs located near England, but because the United States recommends rather than requires them, BP had no incentive to buy one — even though they only cost $500,000. SeizeBP.org estimates that BP makes $500,000 in under eight minutes.

To state the obvious, private industry cannot be trusted to regulate itself, let alone act in the public interest. Over the past few years, BP has paid over $730 million in fines and payouts to federal and state governments, many of which were deemed “willfully negligent.” Granting a waiver to a known repeat offender seems foolish beyond reason. It wouldn’t fly in the criminal courts, and it shouldn’t in environmental regulation.

 

More staggeringly, the Interior Department issued 26 more Deepwater Horizon style regulation waivers after the BP disaster, including 2 to BP platforms.  This failure to regulate extends to both sides of the aisle, from state to federal levels. BP have given more than 6 million dollars in campaign contributions, most notably to President Obama himself.

 

Secondly, those involved have rigged the system to win from failure. Just as traders on Wall Street bet on their own failure, Transocean have actually made a $270 million profit from insuring the rig.

 

Who picks up the tab, then, is those who profited least from the oil rig. The consequences of the oil spill will reach much farther beyond the oil-slicked coastline. CNN money estimates the Gulf industry is worth $234 billion annually. At this stage it is difficult to work out how much of that will be affected permanently, and what will be temporary. The impact on the Louisiana fishing industries has already been catastrophic, yet another hit that the poor state can ill afford. In Louisiana, most people already worked two jobs before the oil crisis.

 

Indeed, the results of deregulation have been catastrophic worldwide. The three decade-long neoliberal project has been to remove regulation, privatize public assets, establish preferential treatment for corporations and to create a public sphere in which everything is for sale. For Wall Street (and make no mistake, BP is a part of this project), this has been a tremendously profitable exercise. For the average American citizen, though, the result has been job insecurity, crippling health insurance bills, and shrinking pay checks.

 

The crisis has destroyed the job market, and resulted in reduced pay. The average citizen pays too in the cutting of vital government-run programs across the nation, for even the American government’s ability to foot the bill for the mistakes of private industry is not infinite. “Too big to fail” only helps out the bottom-lines of corporations and their executives; there will be no golden parachutes for the Gulf fishermen.

 

British historian Simon Schema recently warned in the Financial Times that the continued inequity of the measures ignores a much larger historical pattern:

At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.

The question, therefore, is not only whether BP becomes the Goldman Sachs of the oil industry, or even whether lawmakers and regulatory continue to make the same mistakes, over and over (because clearly they will). The question is, how long will the American electorate allow business and government to ignore their interests without reacting violently?