The real price of cost cutting

A scientific report on last year’s ash cloud from the Eyjafjallajökull volcano eruption in Iceland shows that air traffic controllers were right to close European airspace despite loud protests from airline leaders.

Already in a deep crisis, and facing further losses due to the temporary safety shutdown, Ryanair’s Michael O’Leary, BA chief executive Willie Walsh and boss of Virgin Richard Branson lashed out at the civil aviation authority.

Their bluster revealed much about the dangerous thought processes of the leaders of capitalist enterprises conditioned by the competitive chase for profit-driven ‘economic efficiency’.

Blinded by the bottom-line, O'Leary said at the time that "there was no ash cloud. It was mythical. It's become evident the airspace closure was completely unnecessary... none of us could see a bloody thing." He added: "Some idiot in a basement in the Met Office in London spills coffee over the map of Europe and produces a big black cloud." Walsh portrayed the closure as a "gross over-reaction to a very minor risk" and Branson described the final set of closures as "beyond a joke".

Now, the study by Sigurdur Gislason and colleagues at the University of Iceland in Reykjavik shows the extent of their foolishness. "The particles of explosive ash that reached Europe in the jet stream were especially sharp and abrasive over their entire size range," the scientists say in their study published in the journal Proceedings of the National Academy of Sciences.

"The very sharp, hard particles put aircraft at risk from abrasion on windows and body and from melting in jet engines," the scientists said. "Concerns for air transport were well grounded."

The scientists found that even after the particles had been mixed continually in water for two weeks, they retained their ability to be dangerous to exposed aircraft surfaces. If the authorities had given in to the airlines’ leaders’ ferocious assault, serious structural damage to aircraft could have occurred if passenger planes had continued to fly.

Tests on the ash revealed that it contained minute particles of glass so sharp and abrasive they could have damaged the exposed surfaces of any aircraft, including the engines and cockpit windows.

The consequences could have been far worse than that for the British Airways 747 which suffered potentially catastrophic damage when it flew through an ash cloud from the 1982 eruption of Mount Galunggung in Indonesia. All four of its engines failed as a result of melted ash on the aircraft's turbine blades, but the pilot managed to restart three of them after descending.

In this case disaster was averted. But the same has not been true for the Mexican Gulf or Japan where bottom-line competitive pressures overrode safety concerns.
BP is trying to pass the responsibility for the Deepwater Horizon oil rig explosion to Transocean Ltd, the owner of the rig, and to Halliburton who built it.

At the heart of the failure was the decision to reduce by three quarters the number of concrete collars engineers said were needed to stabilise the drill.
Transocean just gave its top executives bonuses for achieving what it described as the “best year in safety performance in our company’s history”.

Cost-cutting by Tokyo Electric Power Company (Tepco), the largest private producer of electricity in the world, was sanctioned by a corrupt and bureaucratic regulatory system. Maintenance programmes were side-stepped for years.

Tepco’s Fukushima nuclear reactor site was destroyed by a once in a hundred years earthquake and the tsunami it triggered, irradiating the people of Japan once again. These three events shed a blinding light on the dangers of allowing the world’s productive capacity to remain in capitalist ownership.

Gerry Gold
Economics editor

A disaster waiting to happen

The Deepwater Horizon disaster was foreseeable and preventable and was a result of systemic failures in the oil and gas industry, according to the White House enquiry into last year’s oil spill.

In a report which is a model of clarity, the panel notes that for the past 20 years, the oil and gas industry moved into ever deeper and riskier areas of the Gulf of Mexico. This generated huge revenues for corporations and for the federal Treasury.

But during the same period there was growing complacency and absence of regulation, which ended with the death of 11 oil workers and the destruction of eco-systems, livelihoods and the health of unknown numbers of people in states and countries bordering the Gulf.

There were errors and misjudgements by all three major oil companies involved – BP, Halliburton, and Transocean. They failed to properly interpret warning signals; to see flaws in their own testing processes and pushed ahead with untested last-minute design changes.

Deepwater happened, the report says, because the US government let it happen. The Department of Interior Minerals Management Service both regulated the industry and collected tax revenue. Only income tax delivers more cash to the US government, and revenue collection consistently “trumped safety in the Department’s priorities”.

Science was virtually shut out of regulation and decision-making. This was also the case in March 2010, when President Obama agreed to expand drilling in the Atlantic and eastern Gulf.

While Democrats want to implement the report’s recommendations, the Republican majority are determined to prevent any limits on the US oil and gas industry.

And at a recent closed-door meeting, right-wing billionaire activists Charles and David Koch brought the oil and gas industry together to plan a full-on campaign against improved environmental regulation.

BP is still failing on the safety front. An improvement order was issued by the UK Health and Safety Executive (HSE) after incidents in the North Sea. On the Shiehallion oil platform for example, BP left corroded equipment in place until it ‘failed catastrophically’.

So 10 months on from the disaster, how are those affected faring.

BP reported a loss for 2010 but will resume paying out dividends at 4.34p per share. It is on course to return to profit, after signing a deal with the Russian state oil firm, Rosneft to drill in the Arctic.

Halliburton, doubled its profits in the last quarter of 2010, and Transocean, is still active in the Gulf and in many other emerging areas. Reporting on their activities this year, CEO Steve Newman said they were expecting demand for deepwater, ultra-deepwater and ‘hostile environment’ drilling to go on growing.

The US Government agencies (Environmental Protection Agency, Food and Drug Administration and the National Oceanic and Atmospheric Administration) and Obama have declared the Gulf of Mexico, its waters, beaches, and seafood, safe and open to the public.

But residents of the Gulf states are facing a different future. Widespread health problems are reported, including children covered with lesions and people with very high levels of deadly ethyl benzene in people’s bodies.

States close to the disaster are also amongst those where unemployment is continuing to rise, at a time when the Republicans passed laws immediately on being elected to Congress that cut taxes for the rich whilst placing a new time limit on unemployment benefit.

For capitalism, the drive for profits will always trump environmental concerns and governments are only concerned with ‘growth’. Only a transformation of ownership and control of the oil industry can prevent another Deepwater Horizon, which could easily be in the North Sea where deepwater drilling is powering ahead. In May 2010, gas entered a well being drilled by the Norwegian state oil company and according to the Petroleum Safety Authority, only luck prevented the incident evolving into a disaster.

Penny Cole
Environment editor

“A system-wide” problem indeed

In the end, of course, it was a question of saving time and, above all, money. Even the official report into the BP gulf oil disaster has been compelled to come to this conclusion.

On April 20, 2010, the disaster killed 11 workers, seriously injured many others, and spewed over four million barrels of oil into the Gulf of Mexico for nearly three months, creating the largest oil spill ever in American waters.

President Obama set up a commission to investigate the causes. The first part of its report published today acknowledges: “Whether purposeful or not, many of the decisions that BP, Halliburton, and Transocean made that increased the risk of the Macondo blowout clearly saved those companies significant time (and money).”

Although this conclusion is somewhat buried amidst lots of talk about “management failure” in terms of bad communications and so on – it is inescapably the overriding cause of the disaster.

The panel found that mistakes and "failures to appreciate risk" compromised safeguards "until the blow-out was inevitable and, at the very end, uncontrollable". BP's "fundamental mistake", the panel wrote, was failing to exercise proper caution over the job of sealing the well with cement.

"Based on evidence currently available, there is nothing to suggest that BP's engineering team conducted a formal, disciplined analysis of the combined impact of these risk factors on the prospects for a successful cement job," the report reads.

The report lists a host of engineering mistakes and management failures. These include flawed procedures for securing the well and an ineffective response to the blowout once it began.

What the report also reveals is a cosy relationship between government regulators and the oil industry. The agency responsible was understaffed and didn't have the inspectors and technical analysts “who were up to the task fully."

Commission co-chair William K. Reilly said the inquiry had asked whether it was a case of a single company, BP, that “blundered with fatal consequences”, or a more “pervasive problem of a complacent industry”, adding: “I reluctantly conclude we have a system-wide problem.”

Bob Graham, former Florida governor and a co-chairman of the commission, said the findings showed the blow-out was in fact avoidable. "This disaster likely would not have happened had the companies involved been guided by an unrelenting commitment to safety first," he said.

But even he must know that the oil corporations – like any other capitalist business – are guided first and foremost by a commitment to shareholders, to the bottom line, to returns on capital invested. To profit.

Paul Feldman
Communications editor

Corporations make oil a dirty business

Russia and Norway have signed a deal carving up the Arctic Ocean bed, opening the way for a new oil boom. All of this will is certain to lead to more spills, pollution and the further destruction of marine and coastal environments.

The United States Geological Survey last year estimated there could be 90 billion barrels of oil and 50 trillion cubic metres of gas across the Arctic and the oil corporations are itching to get their hands on it.

Companies like Exxon, Chevron and Shell, are queuing up for permission from Greenland – part of Denmark – to begin drilling in some of the most precious eco-systems on the planet. Gas is already being tapped there.

New North Sea fields, west of the Shetland Islands, are also set to be drilled. One of the firms involved is BP and MPs listened open-mouthed as outgoing CEO Tony Hayward told them not to worry – his firm is safe. The Energy and Climate Change Select Committee were questioning him not only about the Gulf Oil spill, but also about the fact that BP’s Magnus North Sea oil platform has failed three oil spill preparedness inspections since 2006.

Even small fields that in the past would not be worth drilling are now yielding profits. Some unique environments are under threat as a result. The Australian company ADX is drilling in the strait between Sicily and Tunisia. They got the go-ahead even though the area is a priority conservation area, with tuna, swordfish, sharks and turtles breeding, and coral gardens with thousands of species.

The island of Panteleria, soon to be declared a marine reserve, is just 13 miles from the rig and would be engulfed with oil in case of a big spill. But the Italian government is keen to expand oil production in their part of the Mediterranean.

In reality, spills are not occasional accidents, but part and parcel of the oil production process. Safety and environmental concerns are never allowed to interfere with the bottom line.

While 10 million litres of oil as day was pouring in the Gulf of Mexico from Deepwater Horizon, monitors discovered there were also continuous leaks from old abandoned wells nearby.

In Venezuela, oil is spreading across Lake Maracaibo, polluting wetlands and mangroves. Fishermen say their nets are coated, and that wildlife is dying.

In the Niger Delta, there are an average 1,598 breaks or leaks in the pipelines each year. Oil has saturated the world’s third-largest wetland, destroying farmland and fishing. But Shell has abandoned Ogoniland to its fate – they are off to the Arctic to get their hands on more easy money.

The side effects of cleaning up spills can be equally as dangerous, with little investment in research and no clear idea of the long-term effects of spraying millions of gallons of dispersants into the sea.

The last major advance in safety was after the fire on the Piper Alpha platform in 1988. But it emerged recently that lies were told about what happened to toxic chemicals stored on the rig for use in the production process. At the time it was claimed these had gone up in smoke – but now it is clear that they went into the water and have destroyed a wide area of marine life.

Humanity needs oil – it is crucial for our survival – but the reckless extraction of oil for burning must be halted. It must husbanded for essential uses. And you could say it is almost a sacred duty to extract it with extreme care and to the highest standards, when it is found in such precious places. There will be times when it should just be left where it is. The first step to achieving this approach is to remove the whole process from the control of corporations who place profit above all other considerations, as the calamity in the Gulf shows.

Penny Cole
Environment editor

Well they cut everything because why not

The post of poet laureate, at least in Britain, is sometimes a source of derision, as she or he is expected to compose verses in praise of the establishment. But the latest recipient of this honour in the United States may be one to break this mould.

In the US, perhaps somewhat curiously, the laureate is officially known as Poet Laureate Consultant in Poetry to the Library of Congress. The Library of Congress has seen fit to appoint an outsider, W.S.Merwin, as the latest incumbent for the job.

W.S.Merwin, appointed in July, was a strong critic of the Vietnam war and is today well-known for his strong ecological stance. Along with others like beat poet Gary Snyder, he has expanded and transformed nature poetry to confront ecological devastation and, as Synder has noted, search for “wildness wherever one can find it. Not just in wilderness areas, but everywhere human beings let go of the controls.”

Despite receiving a long string of accolades over the years, he has been criticised for having a strong political agenda in his work. Merwin, who is 82, has a string of prizes going back to the age of 16 when he received a scholarship to Princeton. Following a recommendation from poet Ezra Pound, he learned to translate from Spanish, French, Italian, Greek, Japanese, Russian and Sanskrit plus and other languages.

His 2009 collection The Shadow of Sirius, published by Copper Canyon Press, has been described as “almost hypnotic, like waves washing a beach”. It draws on his deep feeling for human beings as part of nature.

He is part of a generation of truly great and highly political American poets who include Adrienne Rich, Ruth Stone, John Ashberry, Robert Bly, and the late James Wright and Frank O’Hara. On the whole, they have not shirked from open criticism and defiance of the establishment. Merwin donated his first Pulitzer Prize money to anti Vietnam war activists in 1970.

He rejected the blandishments of US academe and moved to France in the 1950s. Today he lives in on the second-largest Hawaiian island of Maui where he has created the Merwin Conservancy. With his wife Paula Schwartz, he planted some 700 species of palm trees on what was an empty stretch of pineapple plantation which they work on every day in an effort to keep rare species from extinction .

According to Los Angeles Times reporter Dean Kuipers, Merwin jots down his poetry whilst working in the streambed of his mango trees. “I’ve never believed that the imagination, the thing that made poems, is separate from the rest of life at all. It’s a part of it. But we have a tradition as a society that is saying that the rest of life is there purely for us to exploit it without any concern about the consequences of it. It’s very short-term and in my view it’s suicidal.”

Merwin’s approach to the world around us in sharp contrast to that of the corporations, like BP, who published its report into the Gulf of Mexico oil spill which took place in April.

This is all the more vital in the light of yesterday’s publication of BP’s Accident Investigation Report. It is an unedifying spectacle of recrimination between BP and the string of companies responsible for the biggest oil spill of all time. BP is desperate to defend itself against accusations that it bears the main responsibility for the loss of life and vast ecological damage caused by the explosion and leakage. The report is being criticised as a damage-limitation exercise by trying to share the blame with Halliburton for their cement work and rig-operator Transocean.

All power to those who provide a different vision of human existence than that of the current economic and political system. Let’s hope that Merwin doesn’t pull his punches in his period as Poet Laureate!

Corinna Lotz
A World to Win secretary

Plans to bail-out BP

Contingency plans for a possible collapse of BP are reportedly being drawn up in Whitehall as the oil corporation’s crisis continues in the wake of the Gulf of Mexico catastrophe. If the Coalition had to take the company over, it would blow the governments budget-reduction plans apart.

BP accounts for £1 in every £7 paid out to British pension schemes in dividends. The value of the company is uncertain following the largest offshore oil spill in history, which has wrecked ecosystems and affected jobs in US five states. And the thinking is that the Coalition could not allow BP to be broken up or fall into entirely foreign ownership if it meant that pension schemes would suffer.

BP’s management is apparently touring the Middle East looking for governments willing to put up some defensive cash to protect the company against takeover bids from its bigger competitors Royal Dutch Shell, and Exxon Mobil. You can be sure that more than one of Cameron and Clegg’s people are in there batting for BP.

On Fortune magazine’s list of the world’s largest corporations BP ranks fourth, behind WalMart. The company reported profits of US$21.2 billion on its revenue of US$367 billion last year. So the US$20 billion it has so far been obliged to set aside for the costs of the oil spill wipes out last year’s profit.

What happens to BP affects the entire global economy, and not just in terms of its revenue and profits. BP’s product is as important to capitalist production as its profits. The entire system is fuelled and lubricated by oil. This is why proposals to cap the leak altogether fall on deaf ears. Stopping the flow of oil isn’t on the agenda.

Despite the rampant destruction, all of the oil producers are intent on drilling deeper, overcoming all obstacles. It didn’t take long for the corporations to get the US Federal court to overrule Barack Obama’s six-month moratorium on all pending, current or approved drilling plans for new deepwater wells.

BP’s shares have been on the rise again after the price dropped by more than a half since the oil began leaking into the ocean, for three reasons. Firstly, the company declared it wouldn’t be issuing shares to raise capital, which would have diluted the share value even further; secondly, the relief well drilling which, it is hoped, will at least help to stop the leak in August is ahead of schedule; and thirdly, they have just begun deploying a new “super-skimmer”, a third vessel at the leak site that is hoped to nearly double BP's capacity to 53,000 barrels of the leaked oil a day from around 25,000. But rough seas are hampering efforts to finish the job, and more hurricanes are threatening as the effect of climate change induced by the burning of that same oil bites.

Rather than cap the leak BP must scoop up as much as it can. Oil corporations are the most powerful organisations in the world. So last month’s call from General Electric and Microsoft for the US government to more than triple its spending on clean energy research and development has little impact.

If the rest of BP, already 60% per cent owned by non-UK investors were to fall into foreign hands, the British government’s emergency budget will become irrelevant. There’s every chance that Cameron and Clegg will be forced to follow New Labour’s solution to the bankruptcy of the banks and take BP into state ownership.

At this rate, the state will soon control the commanding heights of the capitalist economy! So much for the virtues of private ownership. It’s not at all indispensable. What remains is the issue of the state itself. A corporate state that functions on behalf of a bankrupt capitalist system serves only narrow interests and we should work to replace it with a network of democratic People’s Assemblies. Then we would see some progress.

Gerry Gold

Economics editor

Oil spill goes global

Estimates of the quantity of oil gushing into waters of the Gulf of Mexico continue to increase. BP’S own guess was originally as low as 1,000-5,000. Then the original 5,000 barrels a day grew to 60,000.

Now, more than two weeks into the capping operation, around 45,000 barrels are still poisoning the seas, destroying wildlife and wrecking livelihoods – and there is no prospect of stopping the flow. It is on track to become the worst oil spill since the first Gulf War in 1991, which spilt around six million barrels.

This worsening catastrophe does not just symbolise the intertwined ecological, economic, social and political consequences of capitalist production and distribution. It is at the centre of the universal crisis that is now changing the way of life of every person on the planet. The explosion was by no means an unforeseeable accident. The drive for growth to sustain profits produced a global economy lubricated by increasing amounts of credit and debt and fuelled by oil. As the oil became harder to extract, costs escalated, profits were hit and corners cut.

During the Congressional hearing of the Subcommittee on Energy and the Environment, in the US House of Representatives yesterday, Chair Ed Markey dismantled attempts by the other oil companies to isolate BP. He and other House Democrats ripped into the chiefs of oil companies for filing bogus oil-safety reports before drilling new deep-sea wells, saying they are no better prepared for an offshore disaster than BP. Congressional investigators found that all five of the nation’s major oil firms filed virtually the same safety report prior to drilling new wells - right down to citing a long-dead expert who could be called in the event of an emergency.

The economic consequences are resounding around the world. The highly lucrative local fishing industry has been closed down. Tourism is melting away. BP’s market value has declined by more than 40% since the Horizon drilling rig blew up. The value of pension funds dependent on BP’s profits is dropping like a stone. The mess on Florida’s beaches is heating up the campaign to seize BP’s assets and there are indications that the global corporation is exploring ways to protect its US operation through bankruptcy proceedings.

President Obama’s speech last night, broadcast from the Oval Office, was largely about the need to wean the US off of its addiction to oil. His attempt to divert attention from his inability to do anything effective about the spill not only failed to convince anyone but, according to many commentators, actually worsened the political crisis. As the Financial Times put it ‘And there was something in it to frustrate or antagonise virtually every stakeholder who was listening.’

In his response to BP’s testimony, Ed Markey eloquently expressed the contradiction at the heart of the crisis: “BP is more concerned about minimising its ‘liability’ for the costs of the clean-up than for the ‘livability of the Gulf’ ”.

But the US Congress is no more able to act to stop the destructive actions of global corporations like BP than it is to regulate the financial institutions that arrogantly straddle the world.

The moment has arrived for a new kind of politics and a new kind of democracy based upon collective stewardship of the planet we depend upon. Now is the time for a qualitative change in our relationship with nature. Let’s begin the job of reconstructing democracy from the bottom up through the building of an international network of People’s Assemblies.

Gerry Gold
Economics editor

They have lost control

The trouble with conspiracy theories is the impression given that “they” – bankers, politicians, the military etc – are always in control of events and will thus determine their outcomes to suit themselves. How wrong-headed and disarming this approach is.

Take the United States. Is President Obama in command of the environmental and economic disaster resulting from the BP oil rig explosion in the Gulf of Mexico? Clearly not. The White House can’t even find out how much oil is actually leaking from the ruptured well a mile below the surface.

What about the economy then? Obama’s government has spent countless billions of dollars trying to stimulate the economy, to no avail. Over 84,000 public sector jobs alone have been lost this year and unemployment overall is 10% and rising.

Now Obama insists another $50 billion is needed to save the jobs of thousands of teachers, fire fighters and police officers. Even fellow Democrats are expected to join Republicans to block the plans in Congress. The ability of a powerful government like America’s to determine the course of the economic crisis is patently absent. Not much control there then.

In Britain, you couldn’t say that the Lib-Dem coalition is “in control”. Its very formation was hardly a planned event but the result of circumstances beyond Clegg and Cameron’s control. We are talking about two things here – the result of the general election and the impact of the global financial crisis on Britain.

To appear to be in control, both coalition parties have had to marginalise their own rank and file and claim to be ruling in the “national interest” to save Britain from state bankruptcy. The coalition could flounder over the scale and impact of the spending cuts that are being prepared or as a result of any number of external events.

Surely someone out there must be in “control”, you would think? If it’s not the state and politicians, it’s got to be the bankers and the heads of the handful of transnational corporations that are the dominant forces in the global economy? They only wish they were, especially the CEO and chairman of BP!

The bankers thought they had command as they built the most far-reaching financial empire the world has ever seen. Ultimately, the line between reality and fantasy became so blurred that they lost what little control they possessed. It all went belly up in 2008 as fiction overwhelmed fact. With a huge overhang of debt still waiting to be accounted for, nothing will persuade the bankers to start lending again.

Now people say that financial markets are “in control”. But a market like this one is not some defined group of men and women sitting in known locations who can be told what to do or who will act in a rational way. Financial markets are greater than the sum of their many, many parts. That’s what makes them so unpredictable, prone to herd instinct and fear, rumour and gossip.

The essence of the capitalist beast in times of crisis like these is that far from being in control, there are many indications that it is actually out of control. Global warming, for example, is proceeding without any apparent political capacity to halt it. Recession is turning to slump and spending cuts will only make that more certain.

We shouldn’t conclude, however, that it is impossible to have a rational politics and economics in place of the chaos and turmoil that is global capitalism. For that to happen, we just need to exert out own potential power in new, democratic ways, putting the present elites out to grass.

Paul Feldman
Communications editor