Companies Should Be Accountable for the Consequences of Their Lobbying

This Financial Times editorial on the political fallout of the BP oil spill starts off by making a few good points--acknowledging that BP has made mistakes, calling for the company to reimburse those who have suffered economic damages--before suggesting that the real culprit is not BP but the U.S. regulatory system.

It's not that I disagree with the FT's assertion that "the U.S. has not developed an adequate safety regime" for offshore exploration and drilling, or with it's claim that the agency responsible has "performed lamentably," or with the idea that "there are better regulatory systems the U.S. could emulate."

But the FT seems to believe the U.S. regulatory system developed in a vacuum, that there's a point at which the culpability of BP and the oil industry ends and the culpability of the regulatory system takes over. But the reality is that the oil companies had a major role to play in the development of that regulatory system and that they are as much to blame for the failure of the regulatory system as they are for the failure of the technology.

(As an aside, this is why I find the claims that this is "Obama's Katrina" entirely unconvincing; the current situation is a direct result of the previous administration's attitude toward regulation--this is Bush's disaster, perhaps more than Katrina was.)

The broader point here is that companies and industries should be held accountable for the negative consequences of their policy influence.

If patients are injured by the side-effects of a pharmaceutical product after the company lobbied for looser regulation, then the company should be held accountable. If customers are poisoned by meat producers after those producers argued for less strenuous inspectors, then we should ensure that full responsibility falls on those producers. If an oil rig spews toxic substances into the oceans after oil producers lobby for less stringent safety measures, then those companies should be blamed when the safety measures fail.

I would suggest a simple formula. When activists propose a piece of regulation, companies invariably argue that (a) it's not necessary and (b) it's too onerously expensive. If regulators take the companies at their word when it comes to (a) then the companies should be prepared to put their money where their mouth is by agreeing to pay--without any costly litigation--a fine that is, for example, double the amount quoted in (b) as an argument against regulation