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Oil Spills and Response

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JamieP

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My friend writes:

"I don't mean to continually shellack the libertarian/objectivist position, but how would such a position deal with the oil spill? Or how would it prevent such spills from occuring in the first place.

This article really struck me as an example of unregulated capitalism:

"In Nigeria, Oil Spills Are a Longtime Scourge"

http://www.nytimes.com/2010/06/17/world/af...eria&st=cse

The Nigerian people, sadly, have decided not to form a private organization to combat the fact that international oil congolomerates spill roughly an Exxon Valdez-worth of crude oil into their environment every year, for the last 50 years."

What is the proper system to have set up? Is it to have BP (or whoever is drilling) be responsible for all damages? To have property rights for all fishing areas in the ocean and have BP (or whoever is drilling) to have to pay them to use their property for drilling?

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Private property and 100% liability yep. Basically just implementing the things necessary to bring free market incentives (competition, elimination of regulations restricting them to deep ocean drilling which our technology hasn't caught up with in many respects) and disincentives to the situation and a way for finding out exact damages and who they are owed to, to be paid in full (private property). This way, if there is an incident, the company will likely be ruined or face a severe hit, and there is a very strong incentive to keep safety standards and checking of systems (so they don't break) worthwhile. Right now its basically that people think these regulatory institutions do all the footwork (which it is obvious they don't from this recent scandal) and so let things automate as far as the general populace is concerned. In turn BP just bribes and via collusion squirms there way out of paying full damages and having proper safety standards. If this happened in a free market, BP would certainly be done for, everyone would get the money they deserve for private property damage, etc. There is much higher incentive to spend some money to make sure an incident like this NEVER happens vs. chancing the failure of the company or at best some very bad PR and damage payments that would seriously hurt the company against competitors that feel it is worthwhile to pay for these safety standards.

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Private property and 100% liability yep. Basically just implementing the things necessary to bring free market incentives (competition, elimination of regulations restricting them to deep ocean drilling which our technology hasn't caught up with in many respects) and disincentives to the situation and a way for finding out exact damages and who they are owed to, to be paid in full (private property). This way, if there is an incident, the company will likely be ruined or face a severe hit, and there is a very strong incentive to keep safety standards and checking of systems (so they don't break) worthwhile. Right now its basically that people think these regulatory institutions do all the footwork (which it is obvious they don't from this recent scandal) and so let things automate as far as the general populace is concerned. In turn BP just bribes and via collusion squirms there way out of paying full damages and having proper safety standards. If this happened in a free market, BP would certainly be done for, everyone would get the money they deserve for private property damage, etc. There is much higher incentive to spend some money to make sure an incident like this NEVER happens vs. chancing the failure of the company or at best some very bad PR and damage payments that would seriously hurt the company against competitors that feel it is worthwhile to pay for these safety standards.

ok this makes sense. But I have a few follow up questions:

1) What happens if the damage incurred by a disaster like this oil spill is greater than the company can actually pay? What happens to those people who were owed money? do they all just get a reduced share? Does anyone make up the difference?

2) does the scenario in question one constitute a emergency situation?

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ok this makes sense. But I have a few follow up questions:

1) What happens if the damage incurred by a disaster like this oil spill is greater than the company can actually pay? What happens to those people who were owed money? do they all just get a reduced share? Does anyone make up the difference?

http://en.wikipedia.org/wiki/Chapter_7,_Ti...ted_States_Code

http://en.wikipedia.org/wiki/Chapter_11,_T...ted_States_Code

2) does the scenario in question one constitute a emergency situation?

One would have to know what you mean by "emergency situation."

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http://en.wikipedia.org/wiki/Chapter_7,_Ti...ted_States_Code

http://en.wikipedia.org/wiki/Chapter_11,_T...ted_States_Code

so if company goes bankrupt and doesn't have all the money to pay out what it owes (whether it's BP to fisherman, or a GM to bond holders), then some of those owed money are just out of luck? I understand that the bond holders made an active decision to lend money, but the fishermen didn't ask for BP to drill near them. I only ask because capitalistswine (not calling anyone out, just pointing out a possible scenario I have a question about) said they should be made whole, the fishermen here won't be made whole if BP doesn't have enough money and the fishermen didn't do anything to deserve it.

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One would have to know what you mean by "emergency situation."

My friend has detailed his question for me....the emergency situation I'm referring to is #s 3 and 4 in the parts where he's asking "If this isn't acceptable"

"So Nigeria has minimal government, lots of oil, and very little business regulation. Oil companies have been extracting oil there for over 50 years, with large negative externalities. Roughly one Exxon Valdez-load of oil leaks into the Niger Delta every year, which I think we can agree is a rough end result for the people and the environment there.

I see this as an obvious consequence of a minimal government, minimal regulatory system.

So question is:

1) Is this acceptable and just a consequence of industry?

or

2) Is this not a free-market system and is the spill problem a result of the non-free-market system characteristics?

or

3) Am I missing some way a market-based system could work to correct a problem like this?

If this is a problem that is not acceptable:

1) Who in the private sector assesses the extent or dollar-value of the damage?

2) Who assesses the health consequences to the population?

3) Who provides emergency or interim aid to those affected until a party is deemed responsible and reimbursements are made to the affected parties?

4) Who organizes the clean-up? If it is the offending party, who oversees them to ensure it is done sufficiently? Who sets the standards as to what is sufficient?"

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One would have to know what you mean by "emergency situation."

My friend has detailed his question for me....the emergency situation I'm referring to is #s 3 and 4 in the parts where he's asking "If this isn't acceptable"

"So Nigeria has minimal government, lots of oil, and very little business regulation. Oil companies have been extracting oil there for over 50 years, with large negative externalities. Roughly one Exxon Valdez-load of oil leaks into the Niger Delta every year, which I think we can agree is a rough end result for the people and the environment there.

I see this as an obvious consequence of a minimal government, minimal regulatory system.

I see that as not applying some basic logic. One cannot say something like "there are 15 children in this McDonalds, which has more salt on its french fries, and 6 children in this Burger King, which has less salt on its french fries, therefore children prefer McDonalds to Burger King as a result of McDonalds having more salt on their french fries."

Besides that, the US currently have a non-minimal government, lots of oil, and a lot of business regulation, so by that very same illogic, this must be an obvious consequence of non-minimal government, and an extensive regulatory system.

I don't know the first thing about the Nigerian government, but furthermore to this point, the top two oil spills in history, which totally dwarf the one in the Gulf of Mexico--the Gulf War oil spill and the Ixtoc I oil spill--were both caused by governments, and state-owned oil companies. So again, by your friend's very argument, clearly statism has failed and more freedom is required. But I'm guessing he won't come to that conclusion because it doesn't fit the narrative and he will believe what he wants to believe: there are these evil corporations out there doing nefarious things, and imagine if there was no regulation, legislation, and control of them by our wise public caretakers, then they would spill oil wherever they wanted to.

http://en.wikipedia.org/wiki/Gulf_War_oil_spill

http://en.wikipedia.org/wiki/Ixtoc_I_oil_spill

I hope by now I don't have to point out the bad reasoning employed here. We oppose all business regulations because man's survival depends on him being able to freely employ his mind and he has a moral right to do so with the exception that we insist that no business is allowed to initiate force or fraud against anyone in the process of their operations. This absolutely includes causing physical damage to anyone else's property, whether by accident or whether by intention, whether we are talking about fisherman and businesses on shore, or workers on the rig. Those who do damage the property of others are considered debtors and are under the forced obligation to pay restitution to its creditors.

You bring up the question of "but what if the debtors can't pay the creditors?" That's when the debtor can file for bankruptcy, which then either all of his assets will be liquidated, or the court will organize some sort of payment plan according to what the debtor can afford, plus interest and penalties. I am no expert in these things, but I believe under the Objectivist legal framework, there would be no "soft-debtor" laws which let a debtor of the hook. What if the debtor still, can't pay, you ask? What if they just sit there and have no money whatsoever? Well then my guess would be they would be arrested and charged with theft.

1) Is this acceptable and just a consequence of industry?

No.

2) Is this not a free-market system

The United States is currently not a free-market system, it is a mixed economy, or hampered-market system.

and is the spill problem a result of the non-free-market system characteristics?

The spill was an accident, and a result of the actions of some specific individuals aboard the rig it was on. Also, there was a thread on here a while ago explaining how environmentalist pressure groups contributed to the dangers of drilling by lobbying for laws pushing oil drilling further out to sea. There are many such laws which restrict or just plain outlaw drilling for oil in places where politicians and pressure groups have just decided they get to own and control all the land and keep oil companies off of it. The problem is compounded by this highly restricted oil laws and general lack of property rights on the oceans and beaches.

3) Am I missing some way a market-based system could work to correct a problem like this?

In a market-based system, it would work the same way any other industry works. You buy or lease the property, do whatever on it, and if something emanates from your property uninvitedly onto mine and causes damage, then I hold you responsible in a court of law.

If this is a problem that is not acceptable:

1) Who in the private sector assesses the extent or dollar-value of the damage?

I don't know, that would be up to the courts to figure out.

2) Who assesses the health consequences to the population?

Again, I don't know, probably someone court-appointed.

3) Who provides emergency or interim aid to those affected until a party is deemed responsible and reimbursements are made to the affected parties?

Whoever provides it.

4) Who organizes the clean-up? If it is the offending party, who oversees them to ensure it is done sufficiently? Who sets the standards as to what is sufficient?"

Whoever organizes it. The only role for the government is providing the detectives, investigators, and courts. Everything else should be done at private initiative, including the clean up, with BP under the obligation to pay for it.

Edited by 2046
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so if company goes bankrupt and doesn't have all the money to pay out what it owes (whether it's BP to fisherman, or a GM to bond holders), then some of those owed money are just out of luck?
Your question is actually about the propriety of bankruptcy. We had a thread on that a few years ago; the question is whether a man's debts can rightly be canceled by court order. But this is a fundamental fact of life, one which many people have a hard time accepting (because it is a potential grave injustice), that one man may be harmed by the actions of another, and the injured party may simply never, ever be able to recover. Yeah, that is a possibility, and there's really nothing that can be done about it.
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"So Nigeria has minimal government, lots of oil, and very little business regulation. Oil companies have been extracting oil there for over 50 years, with large negative externalities. Roughly one Exxon Valdez-load of oil leaks into the Niger Delta every year, which I think we can agree is a rough end result for the people and the environment there.

I see this as an obvious consequence of a minimal government, minimal regulatory system.

Uh, the author of this quote needs to get a better clue about the government of Nigeria. Nigeria is the world's premier kleptocracy. Tribal politics are paramount, and it is not coincidental that the government has been primarily northerners, milking resources from the southeast personal enrichment. Most of the time, it is under a military dictatorship; it is and has been the epitome of a corrupt regime, and it would be fair to say that Nigeria has a maximal yet improper government. At no time has the government of Nigeria shouldered the basic responsibility of government, which is to protect the rights of citizens. While the figureheads vary in terms of the extent to which they are power-seeking megalomaniacs or junior Mobutus, an utterly reliable rule of Nigerian politics is that the government is completely corrupt. With respect to the rule of law, Nigeria is hardly more than one step ahead of Somalia.

The discovery of oil in Nigeria was probably the worst possible thing for capitalism, because there is not a shred of capitalism in Nigeria happening w.r.t. oil (or much else). Drawing any conclusions about capitalism whatsoever from the mess that is Nigeria is simply ridiculous.

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Damn, there are a lot of threads on this somewhat recent topic that it's hard to keep up. Anyway, I won't reiterate what I've already wrote in a few of the other threads, so I'll comment on something that President Obama recently said: he's going to treat the oil spill like "war." I heard this statement this morning while eating breakfast, and I couldn't help but think of something cynical. So, in light of his recent statement, here is my advice to the President: Don't treat this like a war, please, for the sake of the future of an entire region. This oil spill needs to be capped within months; we don't need to spend 10 years doing it, with nothing to show but failure.

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Your question is actually about the propriety of bankruptcy. We had a thread on that a few years ago; the question is whether a man's debts can rightly be canceled by court order. But this is a fundamental fact of life, one which many people have a hard time accepting (because it is a potential grave injustice), that one man may be harmed by the actions of another, and the injured party may simply never, ever be able to recover. Yeah, that is a possibility, and there's really nothing that can be done about it.

There is something that can be done about it, though the principle cannot be applied retroactively where it didn't before. A person should have to prove his innocence in order to declare bankruptcy. This way someone who abused their power and/or neglected their responsibility cannot be let off the hook. Bankruptcy should be the exception to the rule, not the rule itself.

Furthermore, until bankruptcy is declared, if some 'entity-by-extension', which is any entity that is wholly dependent upon one or more independent entities in order to exist and operate, which in this case is a Limited Liability Company or Corporation, the people who are responsible for the entity's failure should be the ones legally obligated to bring it back to solvency. A court should be required to find enough people responsible to do this.

There is a fine line between Capitalism and Anarchy. We should not cross over to Anarchy from Capitalism simply because we are afraid of Tyranny.

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