Monday, May 24, 2010

I don’t really get how “the market” is supposed to work in any great detail but as far as I understand it, it’s supposed to act as a kind of infallible guarantor of, well, everything.
Oil will not run out for example, because we will find increasingly economical ways of refining/exploiting it as long as the market mechanism is in place: the market is a kind of collective super-agent, a super-supple safety-net that guarantees that we will always live in the best of all possible worlds. Hence we can dismiss as doom-mongering or mere myopia the concerns of environmentalists, demographers, socialists etc that some point of deadlock or crisis will come about in the future: the market is a kind of “spirit”, the means through which, without any especial forethought or planning, conflicts and shortages are resolved. We are all not just voting everyday with every dollar spent, guaranteeing that only the fittest and best of companies and “providers” survive, but also somehow winnowing away all future problems, if the demand is there, if the profit motive is in play and the market is sufficiently free we enter a kind of holy zone in which human needs, dreams and wishes are spontaneously articulated en-masse and inevitably come to pass. You are always in good, if invisible, hands.

So I’m a bit confused by all this B.P oil slick business. In other words, how does “the market” deal with something like this? I know B.P. shares are taking a hammering at the moment and eventually, who knows, they may go bankrupt X number of years in the future, having created an unprecedented series of environmental disasters and having been effectively winnowed out in the markets inevitable trajectory toward a point of mystically super-attenuated efficiency, but at what cost? What if, in a more realistic scenario, it takes them another month to cap the leak? More bad news for their shareholders, red faces all round in BP management no doubt, perhaps a high-profile sacking or two, and twice the level of pollution.
It seems that B.P had no immediate and adequate means to resolve the problem. Why not? Because it has never happened before. But now that the need for a whole range of specialist tools and responses has been revealed the market will spring into action to deliver them. Of course testing them in exactly the right circumstances will prove tricky, there are always local variables and operating at this, and realistically increasingly greater depth in less and less accessible places and more hostile environments may mean that there’s a huge amount of trial and error involved. Imagine one of those previously inaccessible seams of North sea oil suddenly haemorrhaging as a result of experimental and exploratory new extraction techniques, what would that do to the coastline of Britain? So how long, how many similar such leaks would we have to accept before the market found a suitable response? This isn’t after all like privatising directory enquiries whereby we can allow a hundred competitors to spring up offering their own service, confident that the one which gives customers best value will eventually survive ( though apparently this wasn’t the case with that privatisation anyway, some of the alternate services which died out were no more expensive or less efficient they simply had poorer advertising campaigns/less memorable numbers than 118 118 which must surely now have a private monopoly on the business and has probably increased its tariffs accordingly). Perhaps it doesn’t much matter if you have a load of useless services sitting round dying, as the most robust consumes their market share, but adequate responses to oil spills seem a little more urgent. The time lag in the market adjusting is relatively trivial in some circumstances, less so in others.

I ask this because apparently in the States people are looking to the Government to do something. But what can the government do? Send in its own technicians and experts to replace B.P.'s? They don’t exist, for all the talk either of action, “pushing B.P out of the way” or in terms of finding a more competent authority to resolve the problem “teams of scientific All-Stars” the conclusion is that B.P “have the eyes and ears that are down there. They are necessarily the modality by which this is going to get solved". The government can still perhaps be a lender of last resort in a financial crisis, but it can’t step into a crisis of this nature. Yet, inevitably somehow the public’s eyes turn toward it, then grow angry at its impotence, then move searchingly between the two empty thrones of government and big business. Someone surely must be able to stop this awful thing happening! But what can the Government do other than to “put pressure” on B.P or potentially fine it as a way of “incentivizing” the company further, though as Government is clearly not a part of the market itself, it’s hard to understand why this would be desirable or necessary, isn’t that just Government distorting the market and stopping everything from working the way it should? What could it have done previously in terms of regulating, checking and watch-dogging security procedures? More interference, getting in the way of the market. Do you know what a nightmare of red tape and regulation that would have been? Then a gain, it might have prevented/curtailed this disaster and saved B.P’s reputation, so mightn’t it have been cost effective in the long run? Who knows, maybe red tape actually increases profit and efficiency in such circumstances?

But, then again I imagine that companies that deal with oil-spills are going through the roof right now, the more oil gets pumped out the more secure their future is, the bigger the job, the more employment they can create, the greater the investment in future technologies. They’ll just clean everything up and restock the seas with fish and plankton. There may be some interim period. Do you have any idea how bad the air pollution in Japan used to be? You see crisis and I see opportunity.
Plus we’ve got those booming carbon-trading markets to look forward to too!

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