Friday, December 31, 2010

The Failure of the Free Market

The Deepwater Horizon oil spill in the Gulf of Mexico has long been gone from the front pages. It isn't mentioned in the crawl at the bottom of the television screen during whatever monotonous cable news programming you watch. Given our collective attention spans, this is by no means a surprising outcome. Even the Obama administration has moved on, set to resume drilling in the Gulf of Mexico in short order. But there is one outcome of the Deepwater Horizon spill that bears remembering that I do not think I've heard put precisely into words, namely that the free market failed all of us in the Gulf.

Now many will say that the former Minerals Management Service (MMS) at the Department of Interior had regulatory responsibility over BP's Gulf exploration program. This in theory is accurate, but as has been proven time and again, MMS was at best an absentee landowner, and at worst a willing conspirator with the oil companies. In Alaska, the former Director of the MMS had to issue a formal apology for ordering a cake for an office party adorned with the catchphrase Drill Baby Drill. Needless to say, effective oversight wasn't a priority for MMS in Alaska, in the Gulf, or anyplace else.

In the Gulf, after the Horizon spill, we learned that BP's oil spill response plan was a house of cards, prioritizing of all things the protection of the Gulf walrus population. If MMS was doing it's job they could have pointed out that a plan to protect a species that does not occur within a thousand miles of the Gulf of Mexico isn't bound to meet with much success. And while each individual oil company is required by law to submit an oil spill response plan to MMS for approval, it has now become clear that the plans were all the same baloney, only the corporate logos had been changed. Alas, the Gulf walrus, much like the unicorn and the abominable snowman, has nothing to fear.

So the Gulf of Mexico was turned into a libertarian play ground. A perfect workshop for testing one of the main tenets of free market economic theory, namely that the corporate disincentive for making mistakes negates the need for government oversight and that word that keeps Libertarians up at night: regulation. The logic being that mistakes cost money, and that is incentive enough to avoid them.

But the Gulf spill proves that the pull of profit is a much stronger force than avoiding costly mistakes. Profits are easily quantifiable, and they are the indisputable yardstick for corporate success; on the other hand, an avoided mistake is something almost theoretical, and certainly intangible, a deadly combination for the profit driven corporate decision making model.

BP was left by the federal Minerals Management Service to police itself in the Gulf of Mexico. Free market advocates would have us believe that this was an ideal situation, that the assumed costs of a spill like Deepwater Horizon would assure that the unregulated corporations would do everything they could to avoid a disasterous oil spill. But the the free market model failed us in the Gulf. Corners were cut, laws were ignored, mistakes were made, all in the name of profit. Mistakes were little more than an accepted risk.

Every free market anti-regulator that you can shake a stick at will spout endlessly about the high cost of government regulation, like horses adorned with blinders, they fail to see the high cost of no regulation. Now, BP, the Gulf fishing and tourism industries, and human and environmental health are left to pay the piper. The free market failed the Gulf of Mexico, and proved once again that an ounce of prevention is worth a pound of the cure.

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