A Free-Market Energy Blog

Obama’s BP Time (“We’re from the government and here to help you”)

By -- June 23, 2010

The current oil spill, like the financial crisis before it, has given ammunition to those who believe that the free market is dangerous and that deregulation leads to crises. President Obama, in his June 15, 2010, address to the nation, specifically blamed the lax oversight of BP’s operations on a “failed philosophy that views all regulation with hostility — a philosophy that says corporations should be allowed to play by their own rules and police themselves.”

This gets to a core debate between Left and Right[1] but overlooks the real nature of the problem. For many on the Right, government is the problem, while many on the Left see government as the solution. (This holds true in many different policy areas, from health care to industrial policy, among others.) But a major part of the problem is not government bias or objectivity, but rather government competence, which is not being addressed by most commentators.

Without a doubt, the ‘anti-government’ ideology that has been trumpeted by many on the Right is flawed. There are many things that government should not do, some of which are promoted by those on the Left. The failure of the Mineral Management Service to oversee the safe operation of the Deepwater Horizon (and other operations presumably) in an appropriate manner certainly highlights the fallacy of the belief that industry can regulate itself.

No doubt, this attitude amongst political appointees in the agency put in place by the Bush Administration played a role in creating this shortcoming, and the recent revelations about cozy relations with industry (including sex and drugs, even better than money!) have been repeatedly cited to confirm this.

But this also reflects an anti-corporate bias on the Left (more in another blog), which implies that anything touched by industry or corporations must be self-serving and bad, while the government is objective and dispassionate and can therefore be trusted. There are some grounds for concern about industry being self-serving, in the sense that everyone is self-serving (that’s why Mother Theresa is such an exception). But that does not mean the government can be relied upon to do a good job.

As evidence, consider by another scandal rocking Washington, this one involving the oversight of Arlington Cemetery.

As the Washington Post put it, “The investigators found that these and other blunders were the result of a “dysfunctional” and chaotic management system at the cemetery, which was poisoned by bitterness among top supervisors and hobbled by antiquated record-keeping.” There were no private interests involved, no corruption, and certainly no oil companies implicated, yet those involved performed abysmally.

Beyond that, a pro-industry bias is not the only factor involved in the negligent oversight. Bear in mind that the agency’s employees were not replaced wholesale by the Bush Administration, and, more tellingly, the Department of Interior has long been plagued by charges of rank incompetence. Although it has largely disappeared from memory now, the Department spent a decade and a half struggling with a lawsuit from Native Americans who felt that their mineral royalties had been badly mismanaged.

And this was not caused by economic ideology, politicians of Left or Right, but apparently was a long-standing problem. The suit was originally filed in 1996, during the Clinton Administration, and by 1999, the federal judge hearing the case blasted the Secretaries of Interior and Treasury, saying “the way the defendants have handled this litigation up to the commencement of the contempt trial is nothing short of a travesty.”

The problem is that, in reacting to the apparent carelessness by BP, many politicians are implying that the government can be trusted to do an adequate job of oversight, if it is merely purged of industry influence.

Sadly, this is not the case, although that is hardly a rationale for not trying. Government must provide public goods, such as environmental protection and the safety of offshore operations, but the government should be given no more of a ‘free pass’ than industry. As Juvenal reportedly said, “Quis custodiet ipsos custodes?” Roughly, “Who will watch the watchers?”

“Trust, but Verify”

Perhaps the best approach is to revert to the Reagan-era philosophy (at least the one he applied to the Soviets) of “Trust, but verify.” The government (and insurance industry) should watch the oil companies, the people should watch the government. Historically, all of these have done less than a stellar job, which is why that most famous of philosophers, Pogo, said, “We have met the enemy and he is us.”

[1] I use ‘left’ and ‘right’ as general expressions, recognizing that there is no precise way to parse the polity.


  1. Mary  

    The failure of the Mineral Management Service to oversee the safe operation of the Deepwater Horizon (and other operations presumably) in an appropriate manner certainly highlights the fallacy of the belief that industry can regulate itself.

    I disagree. The creation of an oversight agency can provide a mechanism for industry to EVADE the responsibility to self regulate. Liability /risk is then evaluated, not in terms of damages/lawsuits/lost revenue, but in terms of CYA via the regulatory agency. “You can’t hold me liable, I did what they told me to do”.

    That the regulatory agency did not do its job is NOT an indictment of the “free market” self regulation. It is an indictment of the REGULATORY AGENCY, who laid out the rules of the game.


  2. Steve C.  

    Dysfunctional and chaotic are good descriptions of the performance of many government agencies. Most of these problems are a result of two inherent failings: humans and poor organizational mission design. Since we can’t eliminate the humans, we’ll just have to accept some level of less than ideal performance on that side of the equation. The greater challenge is forcing politicians to come to grips with the facts of life. No organization, even with unlimited resources, is going to be able to do everything well. (See reason 1) Take the MMS as an example. What is their mission? Why do we have them in the first place? Apparently from what’s been publicized they have a dual mission: 1) Maximize federal revenue from resources owned by the public AND 2) Make sure this production is safe. These two imperatives are in tension. This is similar to the FAA which is charged with both air safety AND promoting air travel. More tension. I don’t doubt that with some research one could find that MMS has many more missions that are related to the first two. Is this reasonable? We have seen federal involvement increase in nearly every aspect of our lives in the past 70 years. What’s benefits have we seen? The objective of these regulatory agencies should be simplified and where possible re-engineered. I think on balance you will find that most people who are described as “anti-regulation” are really more anti-stupidity. Case in point the sand berms on the LA shores. Maybe it’s not a good solution, I don’t pretend to be smart enough to know. But I do know that when action is called for in a crisis, it’s usually best to act. As Gen Patton said, “A good plan violently executed is better than the perfect plan tomorrow.” That Jindal has to fight with the EPA (sand berms) and the Coast Guard (life preservers on boats) is an indication that the entire system is designed to maximize the goals and objectives of the organizations and not at solving problems.


  3. Richard W. Fulmer  

    Michael Lynch repeats the myth that George W. Bush’s administration had an “anti-government ideology.” If only. As Reason Magazine reported back in December, 2008 (http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off):

    “The number of pages added to the Federal Register, which lists all new regulations, reached an all-time high of 78,090 in 2007, up from 64,438 in 2001.”

    In addition, the article reported that the number of federal regulators grew by 91,196 while W. was in office (the number fell by 969 under Clinton).


  4. Andrew  

    Um, did I imagine that I wrote a comment on this post?


  5. Ciera Felt  

    Add to that various corporate, payroll and production taxes, oilmen complain, and the state creams off as much as 92% of profits. Ciera Felt


  6. Cooler Heads Digest 26 June 2010 | GlobalWarming.org  

    […] Obama’s BP Time Michael Lynch, MasterResource.org, 23 June 2010 […]


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