Capitalism is not perfect. Sometimes as we work to evangelize the deluded liberal millions we get a bit too exuberant and paint the capitalist system as the only road to an ideal world. The fact is that capitalism does not lead necessarily to happiness and long life. Nevertheless, capitalism creates the best of all possible worlds. It grants us freedom to be what we want, and it also allows us to make mistakes. It allows us to learn to become better people, and to create better organizations.
Reading Loren C. Steffy’s Drowning in Oil made me realize that we do have to temper capitalism with a bit of reason. Some regulation is good as long as it has the desired effect of promoting safety and leaves a level playing field. As an example, there are building codes that help ensure that houses are built with a degree of standardization and quality standards. I did not appreciate how important this could be before I built an addition on my house and the inspectors saved me from making some errors that could have fostered long term problems. My tendency in that day would have been to cobble things together. Regulations, although they seemed onerous at the time, were beneficial, especially to the people who bought the house.
In the case of oil exploration and processing, regulation is perhaps more important, that is when it is properly done. Lives can certainly depend on the government’s actions in this regard. The key is to balance freedom and government interference. Too much government control in the form of regulation can stifle advancement and competition. While too wide open an environment can lead to ecological and human disaster.
There is little question in my mind that error should be on the side of freedom and capitalism. An argument can be made that playing fast and loose with the safety of humans and the environment generally leads to penalties for individuals and companies that far exceed any savings accrued from cost cutting.
The case of British Petroleum and its liability in the Deepwater Horizon incident at the Macondo well that polluted the Gulf of Mexico illustrates how poor government oversight combined with a corporate culture with inverted priorities can lead to disaster. BP paid significantly for its sins in this regard with its reputation as well as monetarilly. The fall-out from the gulf oil spill has not even begun to settle. There will surely be more costs for the British oil giant. Which illustrates that there are, indeed, corporate costs for incompetence that create an incentive for that company as well as others to mind their p’s and q’s.
Even so, it would have been best to have avoided a disaster on this scale altogether. Could the explosion that caused the oil leak been avoided? Technically, of course. Bureaucratically, perhaps. Intrinsically, no. As Steffy shows in his book on BP’s “reckless pursuit of profits”, neither government oversight nor enlightened capitalist self-interest will necessarilly overcome ingrained habit and short-sightedness.
Thus we see that capitalism does not cure every ill. Freedom on the whole is good, but it does have to be tempered with good sense, especially where it can affect the lives of millions. This means giving people the freedom to live and produce as they will. But it also means providing a framework where this can be done in the most intelligent manner.
Read our indepth review of Drowning in Oil.