Tuesday, August 20, 2013

beating a dead horse: deregulation, why it no longer works

            Early Saturday morning, July 6th, 2013, a runaway driverless train, loaded with light crude oil, crashed at high speed into the town center of Lac Mégantic, Québec. It overturned, spilling oil which ignited and creating a general conflagration which obliterated the town center. 47 people died in the fiery apocalypse that morning.

            The rail carrier, Montreal Maine and Atlantic railway (MMA) is a small regional carrier, typical of the deregulated rail industry which resulted from the breakup of our great national carriers several decades ago. "All in the name of Efficiency" we were told - and now we see the results.. Efficiency and Profit are jealous gods and Molochs to which the finest fruits of the earth must be sacrificed..

            MMA has, in the wake of the Lac Mégantic disaster, filled for bankruptcy. And for good reason: their insurance coverage amounts to about $25 million. The clean up of Lac Mégantic alone will cost a cool $200 M, eight times MMA's coverage. And then there's the lawsuits..

             Deregulation of the rail industry has meant what exactly? Well, the federal government does less inspection. Instead of making rules with penalties, it issues inspiring "guidelines" which railways are more or less free to interpret as they will. We have, it is rumored, fallen into a bog of shoddiness that would shame a third world country with a tinhorn dictator (propped up by the CIA, usually). The feds, it is said, knew for years that MMA was close to insolvency, without adequate insurance and a rotten safety record to boot..

             The future does not look brighter. While standards head south, oil heads north (from the Bakken shale oil fields in the US Dakotas in the case of the Lac Mégantic conflagration). Unbeknown to the innocent public, oil shipments have risen astronomically in the past decade. This does not bode well given the evident sloppiness and cavalier attitudes toward safety regulations which deregulation has brought in its wake.


             At this point in the game, the Québec government is doing all it can to recuperate some, at least, of the cost of the clean up and reconstruction. Lawsuits are flying thick and heavy and some big players, with deeper pockets than MMA, are being named. Canadian Pacific Rail, for example (in effect, MMA was merely a subcontractor hired by a major shipper - the lawsuits target those who hired MMA to carry their oil).


             Deregulation no longer works in our present economic and regulatory environment. It has degenerated from the rank of common sense to that of ideology - always a dangerous sign. As in most things, moderation seems the best policy. Deregulation is fine as long as you really are "cutting out the fat". But no process can continue unabated in one direction without danger. Failure to regulate when regulation is called for actually results in increased costs. Why? Because the damage done by incompetents and crooks ends up exceeding the money you saved in the first place by "cutting fat".. As granny used to say: penny wise, pound foolish..


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