July 14th 2001

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Articles from this issue:

COVER: Singapore's economic lessons for Australia

Canberra Observed: Electoral map shows uphill battle for Coalition

Falling fertility debate reignited

Dissenters highlight dangers in UN report

Cloning: how far will states ban go?

Keep the single selling desk for wheat

The Media

Straws in the Wind

Letter: Export figures disputed

Minister resists competition push

Mass destruction in the future

Manufacturing and the sinew of war

Is corporate cost cutting becoming lethal?

French applaud 35-hour week

Books: Colonial Consorts, by Marguerite Hancock

Books: The China Threat - How the People's Republic Targets America, Bill Gertz

Letter: Barley story wrong

Letter: Trade, US-style

Letter: Riddle solved

Books promotion page

Is corporate cost cutting becoming lethal?

by Bob Browning

News Weekly, July 14, 2001
The Supreme Court verdict against Esso over Victoria's 1998 Longford explosion focussed public attention once again on the question of corporate morality in a deregulating, laissez-faire policy environment.

Esso continues by all means available to resist accepting liability for the Longford disaster. The explosion killed two workers, seriously injured others, and impaired the state's economy for an extended period. The company stands accused of industrial manslaughter by failing to maintain responsible risk management.

Risk management includes meeting the costs of identifying hazards to workers and the community, training staff to respond safely and effectively to emergency situations, and monitoring operations for changes in conditions affecting workplace and public safety.

Esso Australia's US parent company is Exxon Mobil, the largest publicly listed company in the world. Exxon Mobil profits last year totalled $A34.7 billion. It is best known around the world for the Exxon Valdez shipping disaster, which spilt masses of oil along the Alaska coast.

When the two mega-corporations Exxon and Mobil merged in 1999, it was actually a reunification. It re-united the Rockerfeller oil monopoly that President Teddy Roosevelt outlawed in 1911. Thanks to the spread of laissez-faire ideology, US anti-trust agencies are exercising a new leniency towards mega-mergers, giant trusts and other oligopolistic structures.

Exxon Mobil reportedly contributed more than $A2.5 million by various means to the George W. Bush Republican campaign for the US Presidency. It has been a big backer of President Bush's decision to pull the US out of the 1997 Kyoto Protocol that requires industrialised nations to cut carbon dioxide emissions. It was also behind Bush's determination to open the Artic Wildlife Sanctuary to oil drilling.

Exxon Mobil is the deep pocket behind much "think-tank" research and advertisements that try to cast doubt on the seriousness of global warming and its possible link to fossil fuel emissions. It is the major force behind the Global Climate Coalition, a business lobby that opposes Kyoto.

Two other giants, Shell and BP-Amoco, pulled out of the oil industry lobby that is dismissing climate change problems. This is partly due to the growing public disdain for Exxon Mobil. A 1999 US study found that it shared with the tobacco giant Philip Morris the worst corporate public reputation in America. BP-Amoco's pull-out may also have had something to do with its being the world's biggest solar energy company.

The attitude of Esso-Exxon Mobil and Big Oil generally to risk management may be reflected in the now infamous boast of the Petrobas corporation. Shortly before Petrobas' P36 off-shore drilling platform, the biggest in the world, collapsed and sank into the Atlantic Ocean off the coast of Brazil this year killing ten workers and spilling oil, a company executive declared:

"Petrobas has established new global benchmarks for the generation of exceptional shareholder wealth through an aggressive and innovative program of cost cutting on its P36 production facility.

"Conventional constraints have been successfully challenged and replaced with new paradigms appropriate to the globalised corporate marketplace. Through an integrated network of facilitated workshops, the project successfully rejected the established constricting and negative influences of prescriptive engineering, onerous quality requirements and outdated concepts of inspection and client control.

"Elimination of these unnecessary straitjackets has empowered the project's suppliers and contractors to propose highly economical solutions with the win-win bonus of enhanced profitability margins for themselves.

"The P36 platform shows the shape of things to come in unregulated global market economy of the 21st century."

So much for supposedly rational economic management! There is unbelievable irony as well as silly hubris in Petrobas' claim to have discovered the profit-maximising benefits of cutting quality assurance and inspection costs.

Unfortunately, profit-centred cost cutting of safety design and maintenance is not confined to Big Oil. Many industries are infected by the same attitudes. Causes include the increasing pressures of unregulated competition, much of it unfairly conducted by anti-competitive oligopolies. Also included is the way economic rationalist ideology actually encourages and legitimates freewheeling, amoral, anti-social, self-serving management behaviour.

Consider some of the evidence currently being presented to the California State Legislature's select committee investigating price manipulation in that State's deregulated electricity market.

Staff from Duke Energy, one of the biggest power producers in California, claimed they were instructed to reduce maintenance and shut production units in an apparent effort to drive up electricity prices. They claimed the plant's managers reduced spare parts needed for repairs and took other measures to reduce output and help drive up prices. Duke management denied the charges (New York Times, June 6, 2001).

Consider also the findings of inquires into Britain's spate of fatal railway disasters. Lord Cullen's inquiry into the October 1999 Paddington rail crash has reached much the same conclusion as earlier investigations into the Hatfield disaster a year later. Privatisation has done little more than add the failings of the corporate sector to those of the public sector.

In his investigation of the Hatfield disaster, The Crash that Stopped Britain, Ian Jack observed that it "arose from a quagmire of divided responsibility and incompetence, inspired by an ideology that placed adversarial money bargaining over human and technical co-operation, in which 'the contract' was divine".

The Cullen report found that Railtrack's experts on signal visibility failed repeatedly to consider action on Paddington because they were "grossly overstretched".

Safety is labour-intensive; but increasingly the pressures in the current economic policy environment are for cutting costs. After railway privatisation in Britain, those employed to maintain and renew infrastructure were reduced from 31,000 to fewer than 19,000, even though the number of train journeys increased.

The fatal gas explosion in Larkhall, Scotland, in 1999 provides yet another example. It is alleged that Transco, the owner of the gap pipe network, failed to renew old metal pipes. The company laid off 1,000 engineers in 1997; now, it admits it is critically short of people needed to maintain safety. The New Statesman editorialised (June 25, 2001):

"Transco, like Railtrack, is a private monopoly, and a private monopoly is the most lethal form of capitalism, because, unlike a company that has to compete, it does not need to factor in public fears, prejudices, preferences and scruples. Its focus is solely on the balance sheet; it sees everything through the eyes of accountants."

Socially irresponsible, sometimes even ruthless corporate behaviour gives the lie to promises that the new globalising policy orthodoxy is the way to better organise the world economically and socially.

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