Who Gets the Blame for the BP Disaster?
a look at consumption, tacit encouragement, and acceptance of systemic risk
Posted May 20, 10:07 pm in business, culture, environment, ethics, human nature, sustainability
The BP oil disaster in the Gulf of Mexico is set to be one of, if not the biggest, environmental disasters in history. There’s been a lot of talk from the political left about about BP’s negligence and how their abject greed and lack of concern for safety precautions led to this problem. While I agree that BP probably did neglect their duties in some ways (evidence does seem to suggest this), and in a lot of ways should be held responsible for their failures, I also think that blaming BP is a very myopic way of looking at the problem and in preventing future disasters.
It’s a longstanding theme— a trope, if you will— within the progressive cultural narrative to blame corporations for all our global and national problems, or at least to finger them as the root cause of all unwanted consumption-related externalities. This view also conveniently avoids having to take serious looks at our own behaviors as individuals and as a society, and how these continually place our country and our environment at risk. When I say this, my point is not to absolve companies of responsibility and to place blame elsewhere. I advocate a holistic view of the entire system— being contemplative about our own roles in the functioning of our society and our complicity in creating it.
Fact: there are serious risks endemic to our energy policy. An error can definitely be blamed on an oil company’s negligence, but simply blaming them does little to stem the damage the disaster creates. As a country, we seem unable or unwilling to face this. Stated another way: there are systemic risks that are inherent in the way our society has chosen to build its infrastructure, and the energy chain we now rely on to achieve the basic functionality of our society.
Blaming BP is a little like going skydiving and having your parachute fail to deploy. Yes, maybe you are right to curse, during your last 30 seconds of life, the skydiving company for their failure to properly prepare the parachute. But as you can quickly see with this example, when you’re falling 120mph towards the hard, cold earth, it’s a bit too late for finger pointing to be productive. What would have been useful to know beforehand was that there is serious risk involved in skydiving to begin with. There will eventually be an accident. No matter what. The statistics might change, but there will at some point be an accident that someone will pay dearly for. And you might be the one affected by that accident. Maybe you should think about that before you go skydiving.
Inadvertent environmental damage. Inadvertent pollution. Inadvertent destruction of natural habitats. Inadvertent damage to ecosystems. Inadvertent killing of important portions of the food chain. These are but a few of the risks we assume with our energy policy. And I would describe this as systemic risk because damage to any one of these spheres could have serious ripple effects in other spheres. A failure of one off-shore oil drilling platform could potentially kill off a vast amount of ocean life. We do not know what degree of damage this might end up being once the effects of this echo throughout the chain. The interplay of factors is complex enough that it’s difficult to predict what kind of collapse we might trigger through one disaster stemming from energy procurement. Realistically, we must come to grips with the idea that things will go wrong from time to time. But to only criticize the companies behind such environmental disasters is to look askance at our own roles in creating the conditions for things like this to happen.
Like it or not, these companies sustain us and our way of life, which is why they are drilling out there in the first place. Unless we are willing to make compromises or wholesale shifts in our consumption as a society, then we’ll continue to have periodic disasters from things like off-shore drilling because things inevitably go wrong every now and then. There is no avoiding this; it’s the nature of a complex system for periodic failures to occur. It’s naive to think that companies simply don’t care about disasters like this; for BP, it’s not only bad PR, but they’re losing billions in profit from all this spilled oil.
Yet, regardless of what happens to the companies, we all suffer for these errors, and maybe in ways we haven’t even thought of yet. One error can be devastating to the entire human race and all life on earth. Yet, we allow companies to engage in activities that expose us to these risks. Why? Because it enables our lifestyle. We could easily prevent them from doing it if we as a society (through our elected officials) agreed that this was not something that was worth risking. But we don’t. We have comfortable lives that we receive as a benefit of allowing the behavior to continue (at least until the inevitable disaster); politicians feel pressure to support risky activities because as a society, we don’t appreciate the level of risk we’re investing ourselves in until it’s too late. Yet, it’s clear that the fewer risky behaviors we encourage or allow as a society, the less number of disasters we’ll have as a whole.
Currently the cap for all damages is $75 million, to be paid by BP. This, as you might imagine, is far lower than either the damage this has been valued at or the amount of money it will take to clean up the spill. Some outraged people think that we should raise that cap into the tens of billions. This sounds good, until you realize that some things are just unfixable. This oil spill (more like a geyser) is pretty much unfixable at any cost. It’s just too late.
Frankly, I think we shouldn’t increase the cap. If anything, I think we should lower it. Why? Having a huge cap will offer us psychological relief that we can keep allowing industries to do things that impose great risks to our society and planet. The larger this cap is, the more we feel like we will have someone to blame and someone who is “responsible” for fixing the problem. But like I said earlier, some things simply are not fixable. A money-back guarantee from a skydiving company isn’t going to do you much good when when you’re falling out of an airplane without a functioning parachute.
If we believe this disaster to be an exemplar of the kind of risk we are not willing to accept as a byproduct of off-shore oil drilling, then we should never have allowed this kind of drilling to be authorized in the first place. If we have low caps on similarly risky pursuits in the future, we’ll probably think a lot harder about what we allow to go on. Getting someone to fork over money for cleanup is the easy part. Actually undoing damage that a disaster on this scale causes is another, largely intractable problem that we’ll suffer the consequences for for a good long time. Lowering the cap forces us, from the very beginning, to think about what we’re doing when we authorize something. That’s what having no insurance policy forces you to do; you have to evaluate things based on an uncolored view of the risks because you are the one who is going to suffer the consequences. This is a realistic view because in the case of environmental disaster, we are all affected; a closed system like planet Earth is at jeopardy in its entirety when just one of the checks in a network of environmental checks and balances is threatened. It’s just easy to forget it when you can bill someone else for the problems.
If we think from the beginning about the costs we all have to deal with instead of the costs “some company” has to deal with, we’ll be a lot more careful in the future. If there is a future.
Comment [6]
Corporate Social Responsibility Can't Happen By Itself
emphasis on short-term profitability stunts CSR’s ability to thrive in the market
Posted Oct 1, 10:40 pm in business, business models, culture, economics, ethics, finance, improvements, marketing, sustainability, unfinished thoughts
Regulation is a pretty hot topic. And when I say “hot,” I mean that it has an uncanny ability to divide a crowd. Progressives seem to generally favor regulations as a means of limiting the damage caused by corporate recklessness, and they have been quite vocal in pushing for greater government oversight in what companies can do, and how much they can do it before incurring serious penalties. Meanwhile, proponents of the free market maintain that the only fair and effective way to handle regulation is to allow the market to do the work; they believe in an efficient economic system that automatically controls problems that really matter (i.e. the problems most people care about). I personally can sympathize to some degree with both sides of this debate, but am not convinced that either can be implemented as solutions to the problems we currently face. What follows is my logic.
Before we can go on though, we have to face facts: it’s been obvious to those paying attention that market forces have not been effective in curbing devastating environmental damage caused by companies who have ignored the social costs of their operations. It’s not limited to environmental damages, either. The recent financial meltdown almost certainly would have been prevented with more oversight.
The traditional progressive (read: “liberal”) line about all this is that these corporations are just greedy and soulless, and don’t care about anything but profit. But this views corporate activity within a vacuum, and denies the economic realities underlying their behavior. In the absence of proper incentives, no company will behave in a manner consistent with diffuse, idealized social goals. Companies by their very nature act in ways that are most beneficial to themselves in the marketplace; even companies that try to do social good still have financial and publicity incentives underlying their behavior. Why? Because if they don’t, they effectively get punished by Wall Street and the market; remember that when we’re talking about the stock market, the bottom line is that public companies (i.e. the biggest organizations on the planet, who control the most money) pretty much need to post higher-than-expected profits consistently— or else. On Wall Street, nobody gives a hoot about how socially responsible you are— unless you’re making money from it. And tragically, our system is structured in such a way that companies really cannot afford to piss off Wall Street, for a number of reasons that go beyond the scope of this commentary.
Nevertheless, that is an economic reality; to condemn a company for being socially irresponsible overlooks the conditions that encourage the sort of reckless behavior that we hear so much about. In my opinion, it’s more of an indictment of our social and financial structure than it is of a company to say that they act irresponsibly. Like I’ve said before, we should think of corporations like organisms. They do what it takes to survive now. They typically can’t afford to think too far in the future, because Wall Street does not reward thinking far into the future; Wall Street rewards thinking about next quarter. Whose fault is that? I’d argue that it’s all of our faults. In an environment of high competition and high risk of market punishment, it’s unfair to blame companies for playing the game by the rules we ourselves constructed. Of course, it doesn’t make what they do ethically right, but like in any evolutionary context, the concept of justice doesn’t play a large role in behavioral decision-making; surviving does.
So yes, public companies do operate by almost strictly by financial motives, just like many progressives indignantly charge. But I would argue that this financial motivation should not at all detract from the actions of, say, Wal-Mart, who has done more than almost any other company in the world to enact serious green initiatives. True, they’ve done it for themselves, their own bottom line, and Wall Street— but still, they’ve done it. And if that’s the motivation they need to do it, then perhaps we should encourage that. Besides, if they were supposed to adopt a sudden conscience about their activities and rectify them, whose social goals are they supposed to strive for, anyway? Lots of different social factions have lots of different goals, and many of them have incompatible or actively contradictory goals.
For this reason, it seems fair to place the decision-making process in the hands of the public, through market forces. That allows a sort of collective decision-making process that is free from being regulated by “some guys on a board,” and allows for us to ostensibly have a shared voice in determining the direction that we take as a planet. Unfortunately, however, there are some problems that such market forces don’t resolve. For example, the economically well-endowed have a disproportionately large voice and thus the ability to unilaterally have a strong negative impact with their choices. And there’s still no guarantee that the aforementioned group will pay attention to social well-being if they’re still being held hostage by Wall Street demands. Free market economics as a means of regulation is dependent on not only market efficiency, but ethical, rational, and well-informed decision-making on the part of consumers— many of which are corporate entities.
But as consumers we are neither rational nor omniscient. We are sometimes ethical. But we can’t know everything about all the downstream effects of all our purchases at the time of purchase. This makes it pretty hard to argue the point that the market will be able to curb environmentally damaging business practices through selective consumption.
That may seem like a slam dunk for regulation, and many on the political left would love to see this happen. But it’s not that easy. The problem of regulation is complex, and it is difficult to enact regulation in a way that appears fair to everyone. Here’s the main problem: if there are regulations, who gets to call the shots?
Some might argue that we should use science to guide our regulatory policy, at least with regards to environmental concerns. But what science? Even science can have an agenda. The more you look into scientific research, the more you see how there is a chain of funding. Funding is a political process. People conducting research are subject to biases. No matter what the science says, or the preponderance of evidence suggesting one thing or another, when it comes down to drafting law, there will almost always be some arbitrary component about implementation (e.g. exactly how many tons of CO2 a company can release per year; exactly what chemicals a company can and can’t produce). And those people whose economic interests are being impinged will no more welcome the validity of the science or the arbitrary lines being drawn than a liberal would welcome Sarah Palin’s views if she was placed in charge of preserving endangered wildlife. Ultimately, any laws will be seen as political tools with embedded agendas.
Though it is debatable how much this might change corporate attitudes towards CSR, I think part of the fix is to change the nature of Wall Street. It does not serve companies or society to have such a heavy focus on short-term profitability. This structure denies companies the opportunity to act in ways that favor their own long-term efficiency, the public’s best interest, and the well-being of the planet. If companies didn’t have to keep impressing Wall Street, they could better take actions that could, over the long term, make their operations more efficient, streamlined, and less wasteful. That would be good for their bottom line and for environmental concerns. But that takes time, and it might require a few consecutive quarters of what may appear to be subpar financial performance. Right now, this is a highly risky strategy that most companies wouldn’t consider because they will not be rewarded for it.
Weirdly, even amidst all the talk about reform in the financial industry, I have not heard any talk about this. Admittedly, I’m not sure if anyone has worked out the details about how a “new and improved” stock market system would work, or if anyone has suggested a better set of economic incentives for waste reduction, but perhaps it’s time we started a national dialogue about it. It seems rather important.
Comment [12]
The New Wave of Advocacy of Financial Recklessness in Advertising
in which desperation about the economy starts to set in
Posted Jun 24, 01:17 am in business, business models, consumerism, economics, ethics, human nature
The poor economy has hit a lot of people very hard. As such, there’s been a glut of commercials on daytime television extolling the virtues of various cost-saving products. But one in particular that I’ve seen lately has been striking in its unbridled pomposity. This commercial features a nicely-dressed, middle-aged, middle-class couple talking tough about their finances. The wife reveals, in a rather distressed manner, that their monthly paycheck is “spent before we even get it.” Her husband adds that they decided that they needed to make serious cuts to their monthly expenses. “That’s why,” the woman says shortly before her husband sits in a nice leather chair opposite a a rather large, late-model flat panel television, “we switched from [a certain brand of satellite television network] to [another brand of satellite television network].” Huh?
Commercials like this trouble me. Obviously, the goal of some marketers is to get people to fork over money for things they don’t necessarily need. However, the mechanism employed by this commercial is to encourage financial recklessness by actively reinforcing the idea that certain luxuries are actually necessities. This demarcation of necessity/luxury is being increasingly blurred by advertisers, many of whom are now attempting to leverage latent consumer concerns about financial security to get them to actually spend more! By buying this [unnecessary] product, you’re actually demonstrating good financial judgment. Objectively, this assertion is not true; yet commercials like this one create an illusory social consensus about the wisdom of certain ill-advised consumer behaviors. After all, why would that nice couple on TV lie to us?
This trend is not limited to premium television channels. Many cell phone commercials seem to suggest something similar about “saving” money through consumption, as do many home internet services. No doubt, these services are extremely convenient, but for most people they are far from necessary, particularly if you are concerned about losing your house or climbing out from under a mountain of debt, both of which are probably much bigger concerns. The auto company Hyundai began running ads encouraging consumers to buy their cars, stating that they would allow a consumer to return the vehicle if their income stream was interrupted in any way. Ford and other car companies soon followed suit with similar programs. The question remains as to whether it is a wise idea for anyone who is concerned about the future of their income stream to purchase a car in the first place; after all, shouldn’t such people be trying to save money for future financial straits for when they potentially lose their jobs?
This brings us to rather salient questions about marketing ethics. Marketers are already considered pretty low on the food chain in terms of ethics, but in the midst of a global financial crisis, advocacy by companies of personal financial indiscretion is still a very ugly sight to behold. We should recall that lifestyles of excess were at the root of the sub-prime crisis, and we might be concerned by the idea of consumers being egged on by industry to continue doing it. We can’t legislate morality, but as consumers we can certainly question the ethical standards of companies whose competitive business model rely heavily on their customers’ bad judgment. But to be fair, we also can’t discount the role of the consumer either; surely consumers must take some responsibility for their own financial well-being.*
Troubling as it may be, I see this as simply a continuation of what has always been going on in marketing communications: companies try to promote certain beliefs, consumers hear it and form a dialogue with it. The ideas that consumers find convenient and/or believable stick; those that do not, fall by the wayside. It’s not perfect, but at least it’s somewhat democratic. But like democracies, sometimes it’s the stupid ideas that win out in the end.
* We tend to think of the U.S. economic system as being largely modeled on free market economics, which is in many ways built on the idea of consumers making informed choices, companies responding to market needs, and companies competing with each other to provide needed goods and services. Shift all the responsibility on any one party, and the equation starts to break down.
Comment [1]