The Locker Room

Crony Capiltalism/the oil industry/and BP

Posted by Dr. Roy Cordato at 2:51 PM

This article by my long time friend Sheldon Richman, editor of the Foundation for Economic Education's magazine, The Freeman, explains why the BP affair is far from a failure of the free market but is rather a failure of progressivist crony capitalism.

This is not the story of a well-meaning or negligent firm operating in the free market... BP is a player in a corporatist system that for generations has featured a close relationship between government and major business firms...Prominent companies have always been influential at all levels of government — and no industry more so than oil, which has long been a top concern of the national policy elite, most particularly the foreign-policy establishment. When state governments failed in the 1920s to put a lid on unruly competition and low prices, the oil companies turned to Franklin Roosevelt and the federal government, winning the cartelizing Petroleum Code, significant parts of which were revived after the National Recovery Administration was declared unconstitutional. In the 1950s, when cheap imports depressed prices, the national government imposed quotas on Middle Eastern oil. (In 1960 OPEC, a “cartel to confront a cartel,” was founded.) Republican or Democratic, energy policy is not made without oil industry input...The coziness between government and the oil industry is also apparent in the cap on liability for damages – a paltry $75 million — from offshore oil spills (not including cleanup costs). The interesting question is whether BP’s dubious conduct would have been different without the cap.

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