To do so, turn on your television, find your favorite news channel, and enjoy the views from the south side of the Deep South—white sands, blue water, and fluffy clouds in serene skies. Or take a Caribbean vacation—sightseeing, shell-collecting, sunbathing, swimming, snorkeling, deep-sea fishing, and seafood. Ah, yesterday. Now switch channels and witness an economic, heath, and environmental, disaster of unprecedented proportions developing daily on and off our southern shores. Oh, today.
First responses to a catastrophe with consequences lasting for decades seem to be partisan point-scoring, fingerpointing, and scapegoating. The usual suspects are greedy and deceitful oil companies, or corrupt or incompetent government agencies. Most people choose sides on the basis of their attitudes not only to the parties, but also to free markets and government regulations. In the debased vernacular of political discourse about economic topics, most people regard markets and regulations as existing in an either/or, not a both/and, relationship. Therein lies the problem.
Let me start with the obvious. “Free markets” are the spaces for transactions between a seller and a buyer. But to be “free,” like it or not, they must be fair. The old adage, “caveat emptor,” or “let the buyer beware,” recognizes that many transactions are not fair. So advanced economies have laws, regulations, and case laws to protect the buyer, and, as economies have grown in size and complexity, society and the environment. The fluctuating tension resulting from changing circumstances and evolving technologies underlies many controversies about the balance between markets and their regulation.
The tension in America reflects strong pro-business and widespread anti-government sentiments. Depending on political philosophy or expediency, politicians oppose or approve, shrink or expand, market restrictions. The result is imperfect markets because regulations do not exist, are small in scope or riddled with loopholes, or go unenforced.
Controversy erupts in the interplay of free markets and regulations in extractive energy industries, prominently including oil and gas, and coal, because they involve many people and much money. Both political parties shy from regulations protecting public as opposed to profitable interests until a disaster of large-scale death or destruction strikes. Then, in a spasm of publicized indignation, they pass legislation, walk away from their handiwork, and fail to oversee the enforcement and effects of regulation. The result is a market free of effective regulation. So “accidents” happen.
American free-markets balance this “bad” with “good” government intervention. Oil-and gas, and coal industry lobbyists play a double game by fighting restrictions on, but seeking assistance for, their companies. Although oil companies constitute most of the world’s ten largest companies and make huge profits, lobbyists urge that the industry needs help with its business. Both political parties believe that it is good to help the needy (who help them right back with campaign contributions). So both parties give oil companies what they want: support, subsidies (like caps on liability, which let companies budget limited costs of risking unlimited damage to everyone else), sole-source contracts (which inflate costs to the government), tax credits, and tax deductions (like oil depletion allowances, which save taxes on oil sold because someday it will run out and leave them with no more to sell). Today—fair is fair—the no-more-oil, alternative-energy industry wants help with its business, so it too lobbies for and receives support, subsidies, credits, and deductions. As a result, the government spends tax dollars on both the fossil-fuel energy industry and the alterative-energy industry, and Americans pay higher-than-otherwise taxes as fees for a “free market.”
My free-market/regulation position is simple. No direct or indirect government transfers of tax–payer assistance from public to private sectors (lower taxes, anyone?). Government regulation of the financial industry by all means and to the extent necessary to prevent collapses, without protection afforded equityholders. Government regulation to promote fair transactions, protect the safety and health of people, preserve the environment, and hold companies accountable for consequences of their actions.
In this vein, Louisiana’s governor commented that one of the two industries—oil and gas, and fishing—on which his state has long relied killed the other. Only a hard-core believer in capitalism’s “creative destruction” could admire the destruction wrought in the Caribbean, an admiration likely abated after a face-to-face, or fist-to-face, argument with those whose living depends on clean Gulf waters.
Given the nature, size, and scope of oil-and-gas and coal-mining operations, only the federal government has the capability to reduce the risks of damage and destruction, provide help, and offer the means of recovery and remedy. We may resent government regulation, but we cannot allow private companies to turn oceans into toxic cesspools, and mountains and valleys into barren moonscapes. So we must not prevent the government from regulating to protect the public interest, and people or companies from each other, between catastrophes; and then, when disaster strikes, complain about, or criticize, it when we the people have hampered its ability to do its job.