Share price for stock in the oil production giant responsible for the ecological catastrophe spreading across the Gulf of Mexico has already plunged by more than a third. No surprise. The story Imagining the Worst in BP’s Future in the Business section of today’s NY Times suggests that the ultimate costs associated with the Deepwater Horizon disaster are as unquantifiable as the amount of oil still leaking into the ocean. Clean-up and restitution alone, it is estimated, could reach $40 billion — enough to break even a company that turns a $17 billion-per-year profit. And that’s before any regulatory penalties for negligence or punitive damages imposed by juries that will inevitably be drawn from the devastated areas.
So it appears increasingly likely that BP will follow such other icons of (what is mistakenly called) “American capitalism” as financial giant AIG and automotive giant GM into the ranks of the “too-big-to-fail.” Meaning that corporate executives will walk off with billions of dollars in bonuses, leaving taxpayers to clean up the mess they leave behind.
The aforementioned NY Times article explains how the too-big-to-failures manage to pull this off:
The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street.
Having thus (ab)used our legal system to separate money-making assets from liability-attaching responsibility, putative “competitors” will be all too eager to move in.
Shell and Exxon Mobil are both said to be licking their chops. And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup — and potentially billions of dollars in legal claims — into a separate corporate entity.
As for the individuals at the (then legally defunct) BP whose short-sighted greed and criminal recklessness brought about this disaster — and let us not forget that 11 people died when the drilling platform exploded — they will “golden parachute” into retirement. Or an executive position at some other Fortune 500 company. Indeed, some may even retain their old jobs, albeit under a different company logo.
The most tragically ironic consequence of the twisted wreckage of BP and its Deepwater Horizon drilling operation is that many will cite it as an example of the unrestrained free market. It is, in fact, precisely the opposite.
Vladimir Lenin was wrong in the very thesis of his seminal Imperialism the Highest Stage of Capitalism. When late 19th and early 20th century capitalists used their economic power to “corner” markets and stifle competition, government enacted anti-trust laws. What Lenin didn’t anticipate was what in retrospect was the obvious move by the next generation mouse – simply gaining control of the mousetrap builders. History shows that it was not imperialism but, rather, fascism that became the highest stage of capitalism. (If it even remains appropriate to refer to a system of government protection of favored, private interests as “capitalism” since that term could certainly no longer be considered synonymous with “free enterprise.”)
And so we have bankruptcy laws that:
- Allowed K-Mart to declare all of its stock worthless one day and issue new stock — same stores, same name, even the same branding — the very next day. Only the erstwhile creditors and stockholders took the hit. K-Mart went merrily on its way without so much as a shrug.
- Left Chrysler’s secured creditors — those who loaned the company money at a lower rate of return in exchange for having collateral — sucking hind teat in favor of unsecured, UAW stakeholders.
- Will permit BP to put its liabilities into one company and its assets into another — shamelessly evading responsibility for all its scum: spreading across the Gulf of Mexico and escaping from its boardroom.
Just don’t mistake this slime for some kind of byproduct of the “free market.”
