Sunday, January 15, 2012

Free Enterprise Run Amok



What do the Costa Concordia and the Deepwater Horizon have in common?  

This week the cruise ship Costa Concordia ran aground in a well-traveled corridor of the Mediterranean Sea.  The top-heavy ship capsized and the search continues for lives lost.  Apparently the captain fled.  In 2010, the Deepwater Horizon spewed millions of gallons of oil into the Gulf of Mexico, destroying all life for hundreds of miles and damaging sensitive gulf coastlines and estuaries.  They are one and the same story.

The Costa is owned by Carnival Cruise Lines, an American company carrying mostly American passengers but Europeans as well.    The CEO, Mickey Arison, is the richest man in Florida, worth many billions.  Though American owned and embarking from American ports, Carnival flies the flag of Liberia.  Liberia does not inspect the ships, regulate safety or environmental standards or collect taxes.  For a fee to the Liberian government, the license is given.  Meanwhile, Liberians focus on the aftermath of their long bloody civil war, not what Carnival Cruise ships are doing.  (Note:  Cruise Law News rates Princess and Royal Caribbean worse than Carnival.)

In exchange for the $35 billion paid by American passengers to Carnival each year, Carnival pays 1.1% in taxes.  When a fire broke out aboard the Carnival Splendor in 2010, the US Navy and Coast Guard swooped in to put out the fire and bring food and medical supplies to the ship.  Estimated cost? About $4 million.  Add up the costs to maintain ports they use (notice that none of these cruise ships sail from one US port to another, which would require some level of inspections), other rescues and assistance to distressed cruise ships, the environmental degradation from fuel spills and sewage freely dumped into the oceans and in port and other costs to all of us.
That nasty raw sewage which cruise lines can freely dump - completely untreated - just twelve miles from shore.  Yes, just twelve miles from that lovely beach you may be sitting on in Florida, or the marshes of South Carolina, or the oyster beds of Alabama.  Nasty, stinking feces from several thousands of passengers eating incredible amounts of food around the clock on hundreds of cruise ships each day.  

"Blackwater" is sewage, waste water from urinals and toilets, and waste from medical facilities.  Gross stuff.  It contains pathogens, viruses including norovirus (when an outbreak on the ship occurs), bacteria, and intestinal parasites. According to Friends of the Earth, a cruise ship on a one week voyage is estimated to generate 210,000 gallons (or 5 large swimming pools) of human sewage. (Source)
A cruise ship also generates 1 million gallons (33 more swimming pools) of gray water (water from sinks, baths, showers, laundry, and galleys).  Cruise ships also generate large volumes of oily bilge water, sewage sludge, garbage and hazardous wastes.
Workers on cruise ships come from the world's poorest countries and work 80 and 90 hour weeks.  Sometimes they go months without paychecks.  Crews are hired with no requirements for training, certification or experience beyond what the company itself imposes.  No wonder the Costa's captain fled ship first, allowing his giant floating hotel and passengers to fend for themselves.  

But regulations and taxes are bad.  So say some in Washington and elsewhere.  Carnival is a terrific example of how unregulated businesses free of tax burdens can operate.  It's a beautiful free enterprise world where more than half of all international ships (not just cruise ships) are registered in Liberia, Panama, the Marshall Islands or even Mongolia and avoid safety, labor and environmental oversight.

As for the Deepwater Horizon, oil rigs are treated like vessels on the open sea.  The Horizon was registered in the Marshall Islands.  When it exploded and continued to pump millions of gallons of crude into the Gulf of Mexico, wiping out whole species and creating a dead sea for thousands of miles, the Marshall Islands, a tiny island group in the South Pacific, did not assume responsibility.  Though owned by Transocean, the Horizon was operated by BP.  BP's ownership reads like a who's who of American and British tycoons.  But BP could operate under Marshall Island rules, rules that minimized staffing and safety requirements, compromised the chain of command putting oil experts ahead of maritime expertise.
"The loss of life at the Macondo site on April 20, 2010, and the subsequent pollution of the Gulf of Mexico through the summer of 2010 were the result of poor risk management, last?minute changes to plans, failure to observe and respond to critical indicators, inadequate well control response, and insufficient emergency bridge response training," the Bureau of Ocean Energy Management concludes.
The joint panel found that "a central cause of the blowout was failure of a cement barrier" that was supposed to seal the well. Halliburton was responsible for mixing and testing the cement. The report says BP made a series of decisions that saved money but increased risk and might have contributed to the cement's failure.
The report's conclusions highlighting numerous failures to observe safety practices and communicate effectively in the dangerous deepwater well drilling operation echoed findings from earlier inquiries, including one by a presidential commission. (Source)
As I listen to the current crop of Presidential candidates extolling the virtues of free enterprise and the evils of regulation and taxation, I am reminded of the Deepwater Horizon.  And now of the Costa Concordia.  Unlike them, I am unable to place my confidence in unregulated profiteers without oversight or obligations.

My mother taught me that the one who made the mess should have to clean it up.  That ought to be true in business too.