Steamboats and Oil Rigs

“[P]rogress marches with tragedy[;] ... new capacities breed new horrors,” as T. J. Stiles writes on page 67 of his masterful biography of Cornelius Vanderbilt titled The First Tycoon (Knopf, 2009).

Mr. Stiles refers in that passage to the death and destruction caused by a series of regrettable accidents at the dawn of the Age of Steam. On May 16, 1824, as he reports, the boilers of the steamboat Aetna erupted in flames in New York Harbor. Not much more than a year later, on June 2, 1825, the Legislator blew up while building up a head of steam at its dock in New Brunswick, NJ, killing in the ensuing hailstorm of superheated water and metal shards three passengers, two African-Americans and one white person, along with one member of the ship’s crew.

In a milieu of short attention spans, sound bites and 24-hour news cycles, nearly every catastrophe, whether it be Mother Nature’s or man-made, is treated by the media as if nothing like it had ever happened before. This Time is Different, as the title of Carmen Reinhart & Kenneth Rogoff’s virtuoso history of financial crises ironically puts it.

“This time” almost never is different: Earthquakes, tsunamis, hurricanes, floods and tornadoes have scourged humankind throughout recorded history. So, too, have accidents at home, on the road, and in the workplace. Mines have collapsed since the first one was dug. Workers were injured or killed on the job well before the Industrial Revolution began.

But as Mr. Stiles insightfully observes, “new capacities breed new horrors”, the poster child currently of which is the explosion at BP’s Deepwater Horizon drilling platform in the Gulf of Mexico that sent 11 men to their graves and precipitated the worst oil spill since the wreck of the Exxon Valdez.

Finger-pointing predictably is now the order of the day. Who is to blame: BP, its contractor or federal regulators? There should have been a plan in place to respond to the disaster in the Gulf, or so says the conventional wisdom. But new technologies foster new hazards, all of which fallible human beings cannot reasonably be expected to anticipate. That failure certainly is true of governmental regulatory agencies. No bureaucrat has incentive to prepare for or to respond quickly to disasters of any kind, as Hurricane Katrina amply proved.

The pro forma policy recommendation on the part of statists is to fire the head of agency responsible for lax oversight and then to impose more stringent regulations on the firm and industry to which liability opportunistically can be shifted. Ignorant hope apparently springs eternal.

BP, already having spent $1 billion to stanch the oil flow, will pay even more of a price for the disaster in the Gulf, not only in the form of lost market value, but also as a result of damages claimed in follow-on civil lawsuits filed by the families of the 11 workers killed in the oil rig’s explosion and by the shrimpers, oystermen, fishermen and the owners of coastal businesses whose livelihoods have been devastated by the spill.

Whether or not the Obama administration can avoid political penalties for its evident inaction, given that the president has claimed to have been “in charge” from Day 1, will be decided by voters in November. It is important to recognize, however, that if a private, profit-maximizing global enterprise was unable to manage the risks of deep-water drilling, no government agency can do so.

Although there is plenty of blame for the disaster in the Gulf to go around, keep squarely in mind that BP in all likelihood would not have undertaken a project that in hindsight was ill-starred if federal regulations had not placed drilling in shallower waters closer to shore off-limits.