Too Big to Fail? The BP Bailout as Corporatism
Nowhere have I seen a clearer example of the perils of corporatism playing out than in the current handling of the BP oil spill. If only Obama understood the context of the decisions he’s about to make, he might be able to use this as an opportunity to turn all this around, and put people and the planet before profits. (Will someone please tell him to read my book Life Inc?)
Like so many presidents before him, Obama is being given an opportunity to choose between corporatism and commerce, between banking and the environment, between investment capital and small business, between passive extraction of value and active creation of value. And, like almost all of them, he’s going the wrong way.
Today, Obama will be discussing the leak – already the greatest environmental disaster in US history even if it were patched right now – with his counterpart in Great Britain, newly elected Prime Minister David Cameron. Why are the two talking? Because if the US actually were to force UK-based BP to pay for damage it’s causing, the company would lose a lot of money – and so would its shareholders.
In the latest round of empty fist waving by Obama and apologetic posturing by BP, the President raised the issue that while BP has spent a few tens of millions on the cleanup effort and damages so far, the company’s annual dividend to shareholders is about $10.5 billion. The company is acting as if all its resources are being diverted to address this spill, when – financially anyway – this is clearly not the case. So as a way of changing the widespread perception that it is underspending on the crisis, BP suggested it might “suspend” – meaning pay later, not never – its quarterly dividend. A gesture of goodwill.
What a brilliant move. By suggesting they might suspend their dividend, BP initiated widespread panic about what would happen if that dividend were compromised in any real way. All of a sudden, business newspapers and cable channels begin calculating just what this means for shareholders – those people and institutions who park their money in an oil company and expect returns. How many pension funds have invested in BP? And how many retirees in England have made the oil a company a central part of their retirement portfolios, and are depending on these dividends to maintain their quality of life?
So now, instead of an transnational oil company against the American gulf fishermen, beach workers, and ocean itself, it’s the interests of presumably innocent British pensioners against American workers. We’re supposed to limit BP’s liability for wrecking our lives and our planet, because of the impact that appropriate penalties will have on those collecting dividends off the oil company’s crimes against us. This means bailing out the company by using government funds to pay for its spill.
Sorry, but the too-big-to-fail argument just doesn’t play. Investors: This is what you get when you decide to bet your retirement on an oil company in the 21st century. Why did you think the dividend was ten times what you’d get from a government bond? Because of the risk. This is the post-Valdez universe, after all. While many of the readers of this blog might be too young to remember that oil disaster, septuagenarian pensioners should be able to remember.
The pity-the-pensioners argument is really just another way of valuing passive extraction of wealth by those with capital over the active creation of wealth by those who work. There are plenty of old people in the gulf who, instead of depending on shares of stock are still working on boats or supporting their kids who are. But under a corporatist scheme, the people who actually create value are much less valued than those who passively extract it from them.
In a healthier, more justly designed economy, pensioners would be investing the excess wealth of their working years into local businesses, their kids’ businesses, or other productive assets instead of the retail stock of long-distance, environmentally irresponsible multinationals. The fact that the latter strategy is failing one is no justification for working people to bail out the investment capital community time and time again.
Then, of course, there’s all those union workers at BP – supposedly in danger of losing employment if we were actually to allow the company to falter. But by favoring the interests of a company operating on the scale of BP over the interests of small businesspeople trying to fish, beach, cook, or even make energy, we simply increase our dependence on corporations for employment. And continuing to favor the corporate scale over the human one just makes it that much harder to choose appropriately the next time. Bailing out Goldman Sachs makes it harder not to bail out BP, and so on.
Don’t get me wrong: this is not a right-left problem. The Left’s commitment to unions is just as debilitating as our Right’s commitment to corporate welfare. For while unions are great for workers already mired in the corporatist scheme, they work against the interests of those attempting to work independently of that system. Union workers need the corporations they work for to succeed, so they end up in a death grip with management – everyone simply fighting over the ill-gotten spoils. Union workers work hard and deserve compensation – but in the big picture, they are more like the crew on a pirate ship fighting for their share of the raping and pillaging.
It’s possible Obama just doesn’t get this (which is why I want him to read my book – or at least have one of his people write a summary for him). He may have benefited so much from the system as it exists that he truly believes that the marriage of government and corporate interests is the best way to work society. He may have seen the short-term successes of corporate welfare, and believe that the maintenance of these outsized institutions really is the only way to provide individuals with the jobs and income they need to survive.
But it’s a losing game and an economic system that is at once bad for people, bad for the planet, and bad for business. BP, and corporations of their ilk, are not truly profitable – not without government intervention, and not without excluding the human and planetary costs of their activities. If BP were actually to pay back the cost of repairing the damage to the environmental and business infrastructure of the Gulf Coast, they would cease to exist.
And if Obama has read a bit of history and economics and does get this? What does that mean? It means that his policy of defending other oil companies and oil-producing nations in our prolonged war in Afghanistan have cost him the political capital he needs to fight on our behalf against BP. England is our only vocal partner left in what has become America’s longest war, ever. We can’t afford to lose them as our friend and ally.
Of course, England isn’t really fighting in Afghanistan because they want to support their great friend, America. They’ve got the very same oil interests that we do. They’ve also the same obedience to the corporations putting politicians in office, giving union workers their jobs, and paying pensioners their dividends.
The BP crisis recapitulates the entirety of corporatism in real time, transparently enough for anyone to see. It should be evidence enough for us to break from business as usual, right now. This is not just a disaster, but a golden opportunity as big as 9-11 to leverage new public awareness towards a positive, groundbreaking shift away from corporatism and back toward the creation of real value – away from corporations, and toward people.
This is Obama’s chance to promote change we can believe in, the change we have been waiting for. If he doesn’t, then we really ought to turn our backs on hope.
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