Monday, May 17, 2010

Barry Ritholtz Lambastes Free Marketeers

I love it when the crazy right can be hoisted on its own petard.

Here's Barry Ritholtz in a posting on his blog The Big Picture:
As Larry Kudlow tells us nightly, “Free market capitalism is the best path to prosperity!” Free markets rock! Get regulations and restrictions out of the way and let good ole free market competition determine the winners and losers. Regulations and government intervention are for (socialist) losers. It’s in our DNA.

Imagine my surprise, then, when I saw a section of the Oil Pollution Act of 1990 (Sec. 1004) that places limits on liability for polluters! How un-free-market-like, to limit BP’s liability in the Gulf of Mexico debacle to a mere rounding error of $75 million! What true free-marketeer would ever stand for such nonsense?

Sec. 1004:

(a) GENERAL RULE.—Except as otherwise provided in this section,
the total of the liability of a responsible party under section
1002 and any removal costs incurred by, or on behalf of, the responsible
party, with respect to each incident shall not exceed—

(3) for an offshore facility except a deepwater port, the total
of all removal costs plus $75,000,000;
Balderdash! How dare the government limit BP’s liability. Let the free markets determine BP’s fate. Why should it be otherwise? Should they face multiple lawsuits and get sued out of existence, that’s nothing more than the Darwinism of capitalism.

I’m just guessing here, but I assume when Senator Lisa Murkowski (R – Big Oil’s Pocket, AK) blocked a proposed bill that would have raised BP’s liability from $75 million to $10 billion it was because, as a Republican and free-marketeer, she preferred no cap at all on their liability and wants to see the free markets work as God intended them to (i.e. sans caps). I base that assumption, in part, on Senator Murkowski’s free-market opposition to a windfall profits tax on the oil industry (“…a windfall profits tax is simply no answer at all. In fact, it is counterproductive.”).

So here’s the deal: What’s good for the goose is good for the gander. If you’re a free-marketeer and believe that BP’s liability for the gulf disaster should be capped by statute — at whatever amount — you’re either not a free-marketeer or a hypocrite.
Go read the original to get the embedded links.

I believe British Petroleum will be bankrupted by this oil spill. That is as it should be. They have been the most careless operator -- for safety and environment -- of all the oil producers. BP's chickens have now come home to not just roost, but to die, molder, and disappear. That's the ultimate in "environmental cleanup" that BP can offer the world.

The US government -- thanks to its "free enterprise" right wing buddies may be limited to $75 million restitituion on a cleanup that will probably cost $30 billion. But private court cases will bleed BP dry over the next 20 or 30 years. That company will not survive. And they don't deserve to survive.

Robert Reich is not as optimistic that BP will be forced to pay. Here is his take in a posting on his blog:
Saturday the White House warned BP that it expects the oil giant to pay all damages associated with the disastrous oil leak into the Gulf of Mexico, even if the costs exceed the $75 million liability cap under federal law. BP responded Sunday saying its public statements are “absolutely consistent” with the Administration’s request.

When you hear dueling public statements like these, watch your wallets. You can safely assume BP’s lawyers are already at work to ensure that the firm pays not a cent more than $75 million — not to taxpayers bearing cleanup costs, not to consumers whose gas bills will rise, not to businesses along the coasts that will lose a fortune. And BP won’t pay more unless or until there’s a law requiring it to.

BP has been making public statements about its supposed corporate social responsibility for as many years as it’s behaved irresponsibly. It’s the poster child for PR masquerading as CSR.


Nor has the firm distinguished itself by its commitment to the law. Several years before the Gulf oil rig explosion, an explosion at BP’s Texas City plant killed fifteen workers and triggered a $21.3-million fine from safety regulators.

In March 2005, corrosion of BP’s pipes and equipment on the North Slope in Alaska led to a spill of 270,000 gallons of oil, the largest spill ever recorded in that fragile territory. Critics said BP wasn’t spending enough money to prevent such spills. Only in 2006, after it was forced by the U.S. government to inspect all its pipelines with an automated device that crawled through the pipes, did the company discover so much additional corrosion and leakage it had to shut down a sixteen-mile feeder line to the Trans Alaska Pipeline.


Ad campaigns about corporate social responsibility are cheap. So are public scoldings by politicians about a corporation’s irresponsibility. Watch not what they say but what they do. The only way BP will pay more than $75 million — and the costs of the spill will easily top that — is if they’re required by law to do so.
Here is a video from CBS's Sixty Minutes that gives you an idea of how badly BP managed this drilling operation:

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