Friday, January 06, 2006

Sharon and Coal

So it looks like Ariel Sharon is stabilizing after his massive stroke(s). His political career is probably over anyway, so I'll comment on what that means for Israel.

I don't think Sharon's new party, Kadima, will flounder as much as everyone thinks it will. Likud (the right-wingers that Sharon left) will probably pick former PM Benjamin Netanyahu as their leader. Labor (the party on the left that Shimon Peres left) has already settled on dovish Amir Peretz. I think Israelis liked Sharon's efforts to plot a middle course between ultra-hawks like Netanyahu and doves like Peretz, and so Kadima will probably still pick up a plurality. That doesn't mean much in the ever-fractious Israeli political system (how many countries have parties that believe that their country shouldn't exist?), so Kadima's success will rest heavily on the somewhat untested Ehud Olmert's ability to lead.

As far as the peace process is concerned, Sharon's policy of unilateral withdrawal will almost certainly continue under a Kadima government, which I like. And even though Sharon has moderated himself in the past couple of years, Arabs still see him as the mastermind of the 1982 Lebanon invasion and the settling of the West Bank. These are notions that die hard, and so most Arabs remained suspicious of Sharon even as he made overtures for peace. Arabs might be more willing to open up to Olmert than to someone they've been vilifying for the past twenty years. Olmert's first moves as PM are of the utmost importance - he must work to build a rapport with Abbas and the moderates within the Palestinian Authority if he wants to build upon Sharon's progress.

Charles Krauthammer and author Gershom Gorenberg give views on Sharon. Here's Wikipedia's article on Olmert.

In other news, I want to comment briefly on the mine disaster. What bothers me the most about this tragedy is not the fact that families were told that their loved ones were alive before finding out the awful truth. What angers me is the fact that, as this Post editorial points out, the Sago mine had an atrocious safety record as it was - and nothing was done about it. Eight severe safety citations occurred from September to December of 2005, and yet the mine was still allowed to operate.

This disaster demonstrates the silliness of the deregulation craze and the unworkability of the conservative model of government. Conservatives like to believe that industries can police themselves, but the Sago disaster proves that that simply isn't the case. Companies will cut corners whenever possible if they think that they can get away with it. Since there are no market forces strong enough to punish companies for safety violations, without government intervention they almost always will get away with it. Such is the nature of capitalism. Deregulation is not worth the cost of laborers' lives. Deaths that can be prevented - such as the ones at Sago - should be prevented.

The mining industry is technically still regulated, but these regulations appear to carry no teeth. Most likely, this is because - as the Post points out - the agency that regulates mines (the MHSA) is in bed with the industry itself. Mine inspectors who aren't in a partnership with the industry must be able to punish mine owners for cutting corners when it comes to safety, otherwise regulations are meaningless. The mine received 96 violations in 2005 alone that could reasonably lead to death or injury. Any one of these violations should lead to the temporary closure of the mine so that needed repairs may be completed - instead, the mine was allowed to operate, and the tragic but all-too-predictable disaster occurred.

It is possible to both maintain a capitalist system and provide for the safety of all those who participate in it. Safety regulations do not put an undue burden on mine owners, especially when we consider the high human cost of not implementing such regulations.

We can either use this disaster as an opportunity to create an effective regulatory system, or we can offer our condolences and go back to ignoring worker safety. Somehow, I think Congress will pick the latter. Shame.


Jacob Grier said...

Interesting post, but I take issue with a few of your thoughts on deregulation. For starters, I'd like to point out that most of the industries conservatives want to deregulate involve restrictions on market entry and pricing, not safety. Thus, conservatives were happy to get rid of the Civil Aeronautics Board that decided which routes airlines could fly, set fares, and limited the entry of new companies. As far as I know, eliminating the safety regulations of the FAA has never been an item on the conservative agenda. The same could be said for lots of other industries, from trucking to energy to banking, where conservatives argue that regulations cause[d] inefficiency by forbidding markets to develop or creating monopolies that protect existing players.

Secondly, it's clear from the article that the regulatory agency in question failed to do its job, while the mining company acted in the cost-cutting way one would expect it to act. To cite an obvious case of regulatory failure and then conclude that regulations are superior to markets makes no sense to me. The correct lesson is quite the opposite: beware when setting up regulatory agencies that they do not get captured by the very industries that they are designed to regulate. It's a phenonenon that classical liberals have warned agaist for years, sadly demonstrated in the deaths of these miners.

Given that mining is an inherently dangerous occupation and often faces little competition from other potential employers (i.e. mining companies are the only major employees in many areas), I agree that it's an industry that probably calls out for regulatory oversight. It's unfortunate that the agency was so lenient in this particular instance.

To address your more general point, I'd argue that there are many cases where industry self-regulation is the best option. In jobs where the risks are transparent and options for alternative employment exist, trade-offs between safety and cost are generally best left to the decentralized interactions between employers and employees against the backdrop of a powerful torts system. It's not a perfect solution, but then neither is regulation. The fear of regulatory capture is one very good reason I prefer unregulated by default, supporting regulation only when a compelling case can be made for it.

Jeff said...

My problem with the "decentralized interactions" is this: the inherent power differential between the ownership and the laborers will ensure that such interactions benefit the owners at the laborers' expense. Friedmanesque theories of withholding labor cease to be applicable when there are families to feed - especially in an era of weakened organized labor. Yes, the torts system is in theory a counterbalance to this power differential, but in practice it does quite the opposite since the owners can afford the best lawyers.

Well-executed regulations are the most effective - and really the only effective - way to put labor and capital on a fair level for two reasons. One, regulations give a firmer legal foundation to the aforementioned torts, making it harder for a well-paid clever lawyer to weasel the ownership's way out of it. Two, well-executed regulations ensure that companies pay a price for jeopardizing worker safety when it is inconceivable that the workers themselves could exact such a price.

I'm with you on airline and telephone deregulation etc. And certainly when it comes to safety and labor practice regulations, regulatory capture is the worst thing that could happen, since the structures erected to dilute the power differential are then being used to exacerbate it. But for much of the 20th century, this was not a problem - it only became prominent with the Reagan era's obsession with removing or diluting all regulations no matter what their effect.

Conservatives, in essence, are using a weird form of circular reasoning. They allow the regulatory agencies to be "captured" by the industries. The inevitable failure occurs. Conservatives then blame regulations themselves for the failure and use the situation as proof that regulations shouldn't exist. The truth is that had conservatives not been so anti-regulation as to allow the agencies to be captured in the first place, the failure would not have occurred.

Regulations may not be superior to markets, but they must often be used to supplement the markets so that they can function for the benefit of all.

Jacob said...

We're obviously going to draw the line between where regulation is necessary or not quite a bit differently, but I don't think it's a matter of a conservative mindset "allowing" an agency to be captured. There are good public choice reasons for expecting it to happen regardless of who is in charge. The first is that for regulatory agencies to function, they have to have information about the industries they're regulating. To some extent they have to rely on information coming from the industry itself, and often the people in the agency will have gained their expertise by working in it. Overlap here seems very hard to prevent.

The second reason is that while the costs of regulations will be concentrated on the players in the industry, the benefits are usually widely dispersed. This gives the industries powerful incentives to be informed about who is regulating them and to try to influence the process, while the rest of us remain rationally ignorant. That's a basic fact of power relations that isn't easily transcended by a favorable ideology.