By Stuart Whatley
This article appeared previously on The Huffington Post.
Perhaps the most enervating element of the BP-Deepwater Horizon disaster is its eerie familiarity—the sheer, inexorable predictability of it all. There is poetic injustice in its propinquity on the calendar to the Obama administration’s decision to expand offshore drilling last month, and to the Supreme Court decision just this year that further did away with any distinction between ‘corporate rights’ and ‘individual rights’.
Equally predictable is the route the story will take, the revelations that will arise, and the conclusions that will be reached. Talk of lax regulatory standards already runs rampant through a wide array of media outlets. Righteous cries of ‘I told you so’ resound. Surely this disaster was avoidable ... it must have been. But from Goldman Sachs to Massey Energy to—now—British Petroleum (and, unsurprisingly, possibly Halliburton), how much will things change? Ultimately the recourse is dictated by the laws we already have in place. And constantly these laws and regulatory structures turn out to have been rendered obsolete and toothless by precisely the entities they purport to oversee.
The gulf story will likely be no more about corporate corner-cutting than a broken political system—the recurring motif of this year. And regrettably, in a nation that incarcerates people by the hundreds of thousands for victimless crimes of self-indulgence it is yet inconceivable that those who wreck global ecological and financial systems could ever suffer anything exceeding the “cost of doing business.” When a corporation falls short of regulatory standards it does not do so accidentally or unwittingly. Rather, it is a calculated choice based on risible enforcement efforts and piddling penalties passed by legislators on the political take.
Massey Energy’s Upper Big Branch explosion that left 29 miners dead last month was a teachable tragic moment. As Mine Safety and Health News’ Ellen Smith thoroughly documented here at HuffPost and elsewhere, dozens of past violations did nothing to alter the toxic cynicism that prioritizes profit margin before safety and lives. Whether those pointless deaths and the pressure from survivors’ families will yield real changes to that reality is yet to be seen. But either way, the likelihood of true justice for this incident seems low. As Smith writes, “Curiously the only individuals who might be held personally liable under the Mine Act for the current disaster are the mine supervisors and foremen. There are no provisions to hold accountable those people who are responsible for safety policies and procedures, or the corporate executives who insisted it was more important to ‘run coal’ than to build ventilation controls, or the board of directors, which is ultimately responsible for the conduct of the corporation.”
Despite lofty guarantees from the president, the same may as well be said for the Deepwater Horizon explosion and its so far cataclysmic aftermath. As the New York Times reports, “Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.”
Beyond the costs of actual clean-up, will BP suffer in the long run? Will Americans stage mass boycotts against the company through consumer discrimination? Will it become the industry pariah that politicians ostracize, even if it provides jobs in their states and districts? Don’t count on it. With gasoline prices already on the uptick and likely to rise more going into the summer season the lowest price per gallon will sell, no matter who you are. This is why the greed always pays off, and it is why neither producer nor consumer can realistically be expected to fix things. Solutions must come from an intermediary in the form of good governance.
Unfortunately we can’t count much on that these days either. It is little wonder that our regulatory structures are so reliably unreliable. And even if there turns out to have been no regulatory failure in the case of BP, the resolution and restitution regime for disasters of this scale is obviously lacking. The fact that OpenSecrets.org—the Center for Responsive Politics website that closely tracks political contributions and special interest “heavy hitters”—is suffering site traffic overloads this week is telling. OpenSecrets does indeed label BP a heavy hitter because in the 2008 election cycle it “contributed half a million dollars to federal candidates. About 40 percent of these donations went to Democrats. The top recipient of BP-related donations during the 2008 cycle was President Barack Obama himself, who collected $71,00.” It also reports that in 2009 BP spent $16 million on lobbying and that in the first quarter of 2010 it’s already expensed $3.53 million for the same purpose, putting it second behind ConocoPhillips for the industry.
Though it’s chump change in BP’s overall budget, half a million bucks in an election cycle can go an astoundingly long way. In their “Iceberg Theory of Campaign Contributions” [pdf], Marcos Chamon of the IMF and Ethan Kaplan of Stockholm University explain the power of special interest threats (made far more credible by Citizens United) as a part of lobbying and electioneering. It basically goes as follows: We’ll give two-thousand bucks to your reelection campaign, but if we’re not pleased with your vote, we’ll give your challenger ten. Taking into account the leveraging that goes into these threats (spending $2,000 for $12,000 of influence), $500,000 all of a sudden becomes much, much more. Chamon and Kaplan cite the U.S. sugar industry for their example, which in 1998 turned $2.8 million in campaign contributions into over $1,000,000,000 in federal subsidies. And sugar doesn’t even compare to “black gold.”
Firms like BP, Massey and Goldman Sachs (to name Public Enemies one, two, and three these days) are the definition of a “special interest.” There is no political, ideological or religious component to their wants. It’s all about the money, and no potential friend on the Hill is precluded. Legislators from both parties enter office with implicit agreements all the time to include this or that subsidy, or to go soft on this or that regulation to hold up their end of the bargain with their electoral benefactors. And when it’s all told one is left with bodies of legislation that appear to be (sometimes actually are) written completely for and by the industry itself.
BP will hang its head for now, but when the class action lawsuits come rolling in from the industries destroyed by Deepwater Horizon, don’t expect to see an overly munificent defendant ready to make amends. And don’t expect it to not scapegoat the owner of the rig, Transocean, Ltd. In the end, John Galt will always capitalize and Joe Six-Pack will always look for the best bargain. Ignoring rudimentary economic axioms won’t change anything.
If corporations may participate in political expression, will they also be subjected to potential political or criminal repercussions that make the cost of doing certain kinds of business too much to even consider? Will “limited liability” continue to apply to unethical and illegal behavior as well as investment? Will stakeholders such as employees, customers and the surrounding environment be kept in mind alongside profits? The compounded frustration with BP, Massey, Goldman and anyone else lurking behind the next crisis will shunt many important questions like these to the forefront of policy discussions. But in the background will always be the money that oils the gears of a perversely incentivizing political system. Until that sees fundamental change, mine ventilation could easily remain inadequate, emergency stop valves optional, and casino-style financial products hidden in the shadows.
AP / Charles Dharapak
PR crisis: The BP logo is seen at a gas station in Washington, D.C.