The explosion of the BP oil rig on April 20, and the subsequent saturation of the Gulf of Mexico with oil, will go down as the biggest environmental catastrophe of all time. We still don’t know what caused the initial blast that took the lives of eleven workers, but there is one important lesson we have learned from the incident. Crony capitalism is the culprit once again.
Our old friend, crony capitalism, unlike free market capitalism, is that mutation of the latter caused by unconstitutional reaches of government. As discussed in previous editions of this column, the most egregious example of cronyism in our economic system is the financial cartel run by the Federal Reserve Bank. We are all familiar with the way banks are permitted to inflate our money supply through fractional reserve banking, ensuring huge profits for them and higher prices for the rest of us. Of course, when the banks overstretch their lending and run into trouble, the Fed is there to bail them out with more of our money.
Besides an endless stream of money to bail out fraudulent banking practices, crony capitalism has attempted to remedy union-induced bankruptcies in the auto industry, and has also provided cash subsidies to wheat farmers and price supports to dairy farmers to keep their products’ prices artificially high and our purchasing power artificially low. Then there are the hidden cronyisms in our system. One of them has been exposed with the current crisis in the Gulf.
Under current law, it turns out that BP is responsible to pay for 100 percent of the cost of the clean-up of oil. Beyond that, the company’s liability for economic damages is limited to $75 million. This means that BP must pay to clean up their mess, but all the fisherman, crabbers, restaurateurs, hotel owners, and others that rely on the gulf for their livelihood will have to split the $75 million pot. Clearly, the losses suffered by the locals on the coasts of Louisiana, Alabama, Mississippi, and Florida will far exceed $75 million. Given that BP earns multibillions every year, a $75 million cap on damages is a pittance of what they should be paying to make lives whole. Perhaps BP wouldn’t have taken such risks by drilling in deep water if faced with catastrophic losses, or they would have at the very least put in place more precautionary measures.
But it’s the same old story – crony capitalism. BP and other oil companies grease the palms (no pun intended) of members of Congress and in return receive special protections in the law. At the end of the day, the taxpayers will foot the bill for this malfeasance.