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BP, socialism and inaction

By Daniel M. Ryan
web posted June 14, 2010

One of the perks that comes with reading history is peeking behind the curtain thrown up by popular narratives, and discovering a past that's quite different than the one portrayed in popular myth. Two rules of popular "mythtory" are: history is written by the victors, and a system or government that's chucked out as an impediment is "really" what it was like at the end. The obvious reason why there has been resistance to exposing the horrors of the Soviet Union, while there has been none to exposing the horrors of Nazi Germany, is the Soviets became part of the Allies in World War II. Had Stalin not kicked off the Cold War by leaning on and later commandeering the newly independent governments of Eastern Europe, we might never have learned of the Gulag, slave-labor camps and the other means of mass oppression and mega-slaughter. The Soviet Union was, after all, one of the victors. Had the Cold War not got rolling, only academics, oddballs and a rump of anti-communists would have seen what was behind the curtain of blood.

The second rule, using senescence as essence, is evident in popularizations of Rome. In popular myth, Rome was "always" a civil but harsh government. Even back in the days of the old res publica, Rome was bent on conquest and glory. You wanna know the "real" Rome? Just look at Nero, Christians being thrown to the lions, the destruction of Carthage, wars, conquest and booty: it began to crumble when the booty ran out, or when Christianization made the tough pagans go soft. Prof. Thomas Madden has a merry time debunking these myths of monolithic Rome in his book Empires of Trust, a task well timed because comparisons of America to "Rome" are legion.

It's the same process for the Vatican, the Dark Ages, the "backward" guilds, non-titular monarchy. How many people know that, when the Dark Ages got rolling, most of the land was owned by yeoman freeholders? That the Vatican, in the Middle Ages, was a vitally needed repository of not only capital but also technical know-how? That the guilds in their prime were one of the intermediate institutions that stood between the 'umble serf and at-times overbearing overlords?  That, before the era of Divine Right, kings accepted that they had no right to tax their subjects – at all - except in war or national emergencies, and even then only temporarily? Around the time of the Dark Ages, it was legitimate to believe that the king's powers were confined to interpreting the corpus juris aeturnis without changing anything in it.

The popular mythifications have their place: they provide closure, and a base to build on. Making Galileo a hero, and the Vatican the villain of ignorance and superstition, was an enabling myth. It helped make science what science is today. The myth than all kings were necessarily tyrants, unless restrained by Constitutions and/or legislatures, enabled modern democracy. Humbling the "backward" guilds freed up a lot of entrepreneurial talent in Britain's Industrial Revolution. Calling that period the one and only "Industrial Revolution," while second-best'ing earlier bursts of entrepreneurial creativity, is a linchpin of democratic capitalism.

I say all this because another moment has arrived, which a savvy mythmaker can run with. Remember the outcry for the U.S. government to seize the assets of BP because of the oil spill? It makes a fitting epitaph for socialism, all-but on the way out. "The demand to seize BP shows the essence of socialism. The spirit of socialism, however legitimate the grievances underlying it, is the spirit of vindictiveness." Granted that this proposition is the kernel of a myth, but it could serve as a closure myth. Should it fly, a lot of the past century will be buried underneath it; it would need to be debunked by later historians. However, as a closure myth, it does free the twenty-first century from the shadows of the twentieth. 

In fact, seeing what's wrong with the demand to nationalize BP shows something wrong about socialism. Look at what's happened to BP's stock, and even to its bonds. The latter fell down to junk levels, and the former lost 50% before a partial recovery late last week. If there's any boot to BP's neck, it would be the stock market's. Even though management isn't topped by proprietors, angry shareholders could boot them out and even sue them. Look at how Tony Hayward publicly responded to the spill. He even apologized for a statement – "I'd like my life back" - that was little more than a personal complaint.

Granted that he minimized the spill at first; that's not too surprising. It's the typical reaction of anyone who's going to be held culpable for something disastrous. What's noticeable is how quickly he backed down from it. Angry customers, angry ex-customers, angry shareholders, angry victims (or surviving next-of kin) who have the common-law right to be made whole, made him recognize the reality. Granted that there was no miracle cure, and that progress has been slow, but there has been progress. Some of the oil is now being scooped up. Relief wells are continuing to be drilled. It's not any public-spiritedness or sense of good corporate citizenship that's impelling BP. It's the recognition that the spill has to be cleaned up ASAP, or an already huge liability bill – not to mention costly bad publicity – will grow even huger. The fate of the company as a going concern may be in the hands of the cleanup crews.

Contrast BP's actions to that of the Obama Administration. President Obama et. al. have tried to say the right things; as political figures, words are their strong point. But, look at their actions. The EPA had the primary responsibility to get the oil-collecting booms out; they didn't. Governor Jindal wanted approval to build sand islands to catch some of the oil; it took about three weeks for the Administration to sign off on it. The only government agency to conduct itself creditably has been the Coast Guard. When pressed, Obama and Co. began chasing the cap-and-trade rainbow instead of concentrating on the storm.

And this is the institution that some Americans want to take over, own and operate BP's U.S. assets. And take ownership of any future accidents.

There's no mystery as to why it's been left to BP. BP has immediate incentives to minimize the damage; the Obama Administration doesn't. As Adam Smith elaborated on so long ago, incentives matter. They call forth actions. The differential between BP and the Obama Administration shows, quite plainly, which party has the greater immediate incentive to mitigate the damage. It's only common-sensical to leave the assets in the hands of the people who respond more completely to incentives, and disincentives.

As we all know, mythifying the past is far more benign that mythifying the real world. ESR

Daniel M. Ryan is currently watching The Gold Bubble.






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