For this article, let me be brief about the following facts, which are oil and water under the bridge.
BP’s off-shore oil leases, like all off-shore oil leases, are leases to use federal property. (Hat tip to this article in The Freeman.) The land and water are owned by the government. Federal bureaucrats—that is, mediocrities and incompetents with no ownership stake in protecting property that they have not earned, could never earn, do not understand, and have no market-based means to value objectively—decide what to lease, to whom, and under what terms. No regime, Obama or otherwise, could teach anyone—let alone the power-lusting, incompetent scoundrels who become regulators for the government—to do this job well. (For background on the evil of regulation and regulators, read Capitalism: The Unknown Ideal by Ayn Rand. If you’ve already read that book, also see here and here.)
Federal law—see Clean Water Act Section 311 and the Oil Pollution Act of 1990—makes it the U.S. President’s responsibility to stop an oil spill and clean up the mess, and also limits a company’s liability for an oil ‘spill’ such as BP’s to $75 million plus cleanup costs. (Hat tip, via Flopping Aces, to Mike’s America, which has much useful information about the disaster.)
BP’s campaign to plug the oil leak has been a fiasco. (By the way, the only thing I knew about BP before the oil spill was from its incessant environmentalist commercials, which had persuaded me to avoid BP gas stations if I ever would encounter them.) BP, evidently performing economic calculations and making business decisions based on the above-mentioned laws, clearly was unprepared for such a disaster. In its attempts to plug the leak, BP spent weeks—while more oil gushed— building needed equipment that could have been in inventory before the blow-out occurred. Like financial institutions before the housing crisis, BP apparently counted on the government to bail it out in case of disaster.
As it bailed out AIG and other financial institutions in the housing crisis, the government stepped in to manage the cleanup of the oil spill. But, as with AIG and other financial institutions, the government changed the rules after the fact, and punished the company it had promised all along to bail out. The legal limit of $75 million on liability notwithstanding, the government has shaken down BP (video here) into putting up a $20-billion escrow account for future claims.
The government’s management, with BP, of the oil spill has been a fiasco. As of Thursday, June 19, sixty days after the blow-out, the government reports (“more than”) 6,100 “active response vessels.” The size of the oil slick is now roughly (by my estimate from the map I link to) 20,000 square miles, so the government has roughly one vessel for every three square miles of oil slick. As of May 20, thirty days after the blow-out, the government reported that “more than 1,000 vessels are responding on site.” That is, more than 5,000 of the 6,100 vessels now on site did not show up until the second month. Of the more than 6,100 vessels now deployed, “more than 440” are skimmers; that’s less than one skimmer for each 40 square miles of oil slick. The government—probably from loyalty and subservience to labor unions—has declined to suspend the Jones Act, thereby declining assistance from much-needed specialized vessels owned by foreign companies.
In his speech from the Oval Office on June 15, Obama said, “We now have nearly 30,000 personnel who are working across four states to contain and clean up the oil.” Meanwhile, a half million people are deployed to take the census.
So much for the oil and water under the bridge. What should we do right now, at this moment, to deal with the disaster?
What we desperately need is capitalism—that is, private property.
We should take all of the federal land in the Gulf of Mexico—and all the water on top of that land—and declare it one large block of private property owned by one new corporation. The new corporation—let’s call it Gulflandia—would in turn be owned by the individuals and businesses that currently exploit the Gulf; such individuals and businesses would include oil companies, fisheries, and owners of beachfront property. Ownership of Gulflandia could be apportioned according to the amount in taxes paid by its owners over the past decade. (The precise rule for apportioning ownership is less important than that the property be owned privately instead of by government; those who value the property most highly would soon buy the shares of initial owners.)
As the owner of the property on which the oil spill exists, Gulflandia should be allowed to request a court injunction to remove the inept and obstructionist federal government from the clean-up effort, and to hold authority over BP in BP’s effort to stop the leak. (BP and the government are the two best organizations to blow up another oil rig, but not to solve the problem from the last blow-up.) Gulflandia’s assets would be worth hundreds of billions—perhaps trillions—of dollars, which means that it would have the financial means to entice greedy entrepreneurs from all over the world to devise ways to stop the leak, clean up the mess, and preserve the value of the property. (In contrast, the government currently relies mainly on government agencies and volunteers working for free or for daily wages.) Overnight, virtually all of the world’s entrepreneurial engineering firms would turn their attention to solving this problem.
At the same time, all of the individuals and businesses suffering from the loss of fishing, tourism, and oil drilling (because of the moratorium), would have immediate relief. Their share of the new multi-trillion dollar asset would be something they could sell or take to the bank.
For more depth and details on the reasoning behind such a capitalist solution, see my article on applying the capitalist principle of private property to the challenge of space exploration; that article, Mars: Who Should Own It, is in turn based on an idea by philosopher Harry Binswanger. Also see Ayn Rand’s essay, “The Property Status of the Airwaves,” in Capitalism: The Unknown Ideal.
That no one in government is discussing a solution remotely like mine illustrates how far from capitalism we are.
First published on Ron Pisaturo’s Blog.