The Gulf Spill and the Hidden Vice of Capitalism

Here is one aspect of the Gulf spill no one seems to be talking about. It concerns the same thing that conservatives commentators, libertarian journals, and economists seldom take into consideration: Persons in the upper management of large corporations are not necessarily very intelligent and few are well-educated. That is the hidden vice of capitalism. For once, I am speaking as an expert. (Go ahead, check my vita linked to this blog and then, re-check the facts on Google. Make my day!)

The BP-caused oil spill – going on for more of a month as I write – is also a public relations disaster for the corporation. As I said earlier ( “The Louisiana Oil Disaster? Posted 5/21/10), we are still missing the moving photographs of thousands of dead, soiled aquatic birds. There is in and around Plaquemines parish a group of stake-holders that is becoming increasingly vocal: The fishermen. I heard some on NPR on 5/25/10 complaining that BP has mostly ignored their wishes to “volunteer” to help. It sounded true and it sounded incredible to me.

Whatever happens, BP is going to be on the hook for hundreds of millions of dollars, possibly for more than a billion dollars. The fishermen whose livelihood and whose future appears to be threatened by BP’s negligence number in the hundreds. I doubt that there are a thousand of them altogether. At the risk of sounding cynical, I will say that they are the only easily identifiable group of human victims who tug at ordinary Americans’ hearts. It’s easy to imagine that most Louisiana fishermen don’t have a doctorate in solar energy science, for instance; it’s easy to recognize that few can readily switch to another occupation. That they may want to transmit their legacy to their children is also understandable from an emotional standpoint. Finally, the tens of millions of American who fish recreationally will have no trouble grasping that the Louisiana fishermen may love their occupation and the lifestyle that goes with it. I am skeptical myself about the extensiveness of the damage. I don’t hope it will become Obama’s Katrina. Yet my heart goes out to those unknown fishermen deprived of both livelihood and, it seems right now, of a future.

That’s why I find it incomprehensible that BP has not taken the following simple measures: Gather everyone who claims to be a fisherman and is in a boat that moves under its own power. Give $100 a day to very crewman, $150 to every captain, and another $200 for the boat. I think the total cost would be under $200,000 a day or six million dollars for a month. And yes, there would be graft and cheating.

BP could simply tell the fishermen that they are “on call,” to be deployed at four hours’ notice as needed. Almost all would cooperate because the urge to do something in a crisis is irresistible. The shirkers would not be missed and they would be shunned by their neighbors. Tempers would subside. The locals would be turned from louder and louder claimants enjoying the world’s sympathy into allies of BP.

Why does not BP do anything so simple, you wonder? Back to my opening comments. The upper levels of big corporations are replete with people with mediocre minds. That this is not well-known is the fault of ignorant journalists and of devious business schools. (Disclosure: I taught in a business school for more than twenty years.) In fact, the evidence that CEOs of big corporations, for example, do anything that is both useful and important is slim and ill-founded. I mean by the latter that the empirical evidence in support does not begin to reach the level of rigor expected in the social sciences in general. The quality of the evidence does not even come close to what one expect routinely in the social sciences that concern themselves with business specifically. I know this because I refereed for such journals and submitted my own research to them for thirty years. ( There is a column on the technical topic of scholarly refereeing somewhere on this blog.) Warning: I stopped taking interest in that kind of research about three years ago. If some great, well-executed study has appeared on the topic since then, I might not know of it. If you know of one such, please, let me know that I may correct my ignorance. In summary” The myth of the god-like captain of industry prevails. It prevails without much successful challenge because it’s a myth, precisely, the founding myth of capitalism.

How can such a disturbing, dismal view of corporate governance be correct? There are two, explanations; they are not mutually exclusive; in fact, they overlap. First, academics in general don’t receive well innovations that may undermine scholarly reputations built over a life-time. There is some good in this because many innovations are, in fact, frivolous, the products of passing fads. Yet, scholarly innovations with impeccable credentials, the very credentials the fortress defenders claim to respect, also have difficulty gaining a foothold. Frequently, when they do gain a foothold, they are restricted to a ghetto for a generation or more. Evidence in favor of the idea that CEOs are omniscient and omnipotent need not exist. Any evidence that they are not is guilty until it proves itself innocent, over and over again.

The second explanation is crass: Most or all business schools derive a significant fraction of their revenue from private donations and endowments. Donations, other than bequeaths by the dead, are always decided on or reviewed by CEOs or by their creatures. The unspoken consensus in business schools is that there is no need to bite the hand that feeds you, even if it feeds you only dessert. Why antagonize the people with wallets in hand with research and publications that minimize their importance and suggest they may not be all that bright? This state of mind does not result from any conspiracy. It needs not be expressed. It’s part of the culture of business schools. In support of this thesis is the well-known fact that the richest business schools turn out the most iconoclastic research Stanford University comes to mind where the mindset goes like this: You want to bequeath us what? Thank you, we are busy right now. If you can call tomorrow, we will try to find you a spot in the line of donors.

Its’ chic nowadays to downplay the relevance of academia and academia has done much to earn this contempt. The fact however is that business schools teach vast numbers of undergraduates, and only slightly smaller numbers of MBA students. They instruct ordinary people, journalists, teachers and teaches of teachers. Almost anything anyone in America knows about business come from or is heavily influenced by this teaching. What business schools teach matters in the long run although in diffuse ways.

While it might be used that way, this short essay is not an argument for government intervention or supervision. The perception that government bureaucrats know anything at all is even more questionable. After all, they have been running the US Post Office for 230 years!


About Jacques Delacroix

I am a sociologist, a short-story writer, and a blogger (Facts Matter and Notes On Liberty) in Santa Cruz, California.
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8 Responses to The Gulf Spill and the Hidden Vice of Capitalism

  1. jjoshuajj21 says:

    Incompetent and Impotent authorities who only specialize in corruption, negligence, and fraud is what we have for a government, and they care nothing about us. So, if you want to discover how to make these leeches expose themselves, and if you want to discover how to beat them at their own game, then take a look at my petition for writ of mandamus >>> <<<<

    • jacquesdelacroix says:

      How about explaining first what a writ of mandamus is. One sentence will do for my blog, to introduce the link (without endorsing it).
      I think our elected officials try to do their job most of the time. It seems to me you are not allowing enough for ordinary human incompetence. It’s all around me. How can I ignore the possibility it’s also in Congress and in the White House?

  2. jjoshuajj21 says:

    A Writ of Mandamus is an extraordinary remedy issued by a superior court to a lower court, directing the lower court to perform it’s judicial duty, or to restrain the lower court from invading constitutional protections afforded to USA Citizens. So, what I’ve done is to expose a lower court’s unconstitutional procedure, and the Higher Appellate Court was suppose to put them in check, or at least enter an opinion about the matter. Since the Appellate court refused to do so, this case is conclusive proof of corrupt judicial bribery that turns a blind-eye to a violation of our most guaranteed rights, and We-The-People need to oppose this invasion. If we don’t expose and oppose this invasion of our basic human rights, then our basic freedoms, our sovereignity, and everything we stand for will collapse within one year, I guarantee you that. This case is also an example for others to prove similar issues, so that the public will see, know, and understand, and support those who take action to fight back.

  3. Frere Jacques, you are, as usual, right about the general worth of capitalists and businessmen.
    Ayn Rand tried to portray them as heroic, but, alas, most aren’t.
    Look at how quickly they usually cave before the slightest governmental pressure.
    Also, look at how BP and its upper-echelon management contributed tens of thousands of dollars to Barack Obama’s campaign.
    And look at how little — close to zero — any of them give to genuine free-market advocates such as the Libertarian Party.
    As one of Ayn Rand’s characters said, paraphrasing, it’s a shame we have to save their rotten necks in order to save our own.
    Up the rebels.

    • jacquesdelacroix says:

      MUch to talk about there. If I remember, I will do an essay on the difference between capitalist entrepreneurs and hired hand corporate managers. When I do it will depend on how the fishing goes this summer.

      • It is important to realize there is a difference between “capitalist” and “free-enterpriser,” or entrepreneur.
        The “capitalist” is a “money-ist”; the free-enterpriser is the advocate and practitioner of free enterprise, of freedom.
        Rockefellers and Kennedys have been capitalists, as have many other rich politicians.
        But genuine advocates of freedom, of free enterprise have been pitifully few, especially in government.
        Though I hope the fishing is great, I also hope you find time to write that essay.

  4. Pingback: The Gulf Spill and the Hidden Vice of Capitalism « Notes On Liberty

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