The first time my wife and I visited England we had occasion to go to a post office. After waiting for some time in line we got up to the postal worker who treated us curtly and rudely—practically the only time we were treated rudely in our entire visit. My wife and I looked at each other with a sort of nostalgia. It was a taste of home. Postal workers, apparently, were the same the world around.
I can only conclude from his confidence in the possibility of regulatory competence that Dr. Krugman has never mailed a letter, applied for a drivers license, received a building permit, had new construction reviewed by a building inspector, served as a judge of election, or served on a jury. If he had enjoyed any of these workaday contacts with government I don’t think he could write something like this:
Yet there is a common thread running through Katrina and the gulf spill — namely, the collapse in government competence and effectiveness that took place during the Bush years.
The full story of the Deepwater Horizon blowout is still emerging. But it’s already obvious both that BP failed to take adequate precautions, and that federal regulators made no effort to ensure that such precautions were taken.
My own view is somewhat different. Things happen. We muddle through. The very procedures of bureaucracy in government ensure that it will never operate as efficiently as the imagined government of Dr. Krugman’s dreams.
Let’s consider a single area of government: financial regulation. The Bush Administration increased funding for financial regulation in real dollars by 20%, increased the budget of the Securities and Exchange Commission by 76%, and increased the SEC’s staffing levels by 26%. Are we to believe that every staff position at the SEC and every other federal agency was specifically vetted for incompetence? Or is it more credible that the normal civil service procedures, roughly the same as those that prevail now, were followed? And that regulatory capture was virtually guaranteed by the conditions of the work?
When was this regulatory parousia that Dr. Krugman envisions? Was it under the Clinton Administration? As recently as 2008 Bill Clinton said of the the much-pilloried Gram-Leach-Bliley (the bill that effectively repealed Glass-Steagall) which he signed into law:
I don’t see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn’t signed that bill.
If Gram-Leach-Bliley is part of the criticism of regulatory competence, then we should conclude that the issue is a bipartisan one.
I don’t mean by my comments to imply that I think that government is useless. I don’t believe that. I do believe that evaluations of competence are invariably retrospective rather than prospective while the perfectly competent government that Dr. Krugman envisions is always elusively in the future. In the messy, chaotic now nobody is perfectly competent and it is the very structure, methods, and incentives of government that ensure that that will remain so.
One final thought. Has government become less competent or does the vastly increased information we have now about the operations of government merely reveal how imcompetent it has been all along? Another possibility is that the increased complexity of the contemporary world has outgrown any government’s ability to manage effectively. We may be in for a bumpy ride.
I don’t know what caused the gulf spill and neither does Dr. Krugman. Was it an engineering failure? Was it a failure of operation or maintenance? Was it failure of improperly installing the appropriate equipment? Was it just plain bad dumb luck? No one yet knows, certainly not Dr. Krugman.
“Another possibility is that the increased complexity of the contemporary world has outgrown any government’s ability to manage effectively. ”
This increased complexity is something I’ve thought about for a while. The inability to manage is not, of course, limited to government. The complexity of financial instruments comes to mind with their attendant incomprehension on the part of financial managers. In this same vein, we have the latest minipanic apparently caused by complex computerized trading schemes. Unintended consequences are, I fear, an inevitable aspect of complexity, and if successful managing means planning for contingencies, then with increasing complexity, the chances of successful managing decline. One cannot plan for an unintended consequence.
On complexity, I don’t things are more complex – rather I think conditions have changed, but government hasn’t adapted. Many parts of government still operate with industrial-era processes and mindsets. In a way, I think our federal government is a lot like GM – It was great in its heyday 40 years ago, but since then has been too slow to adapt, too set in its ways, and unable to effectively modernize.
I think you’re being kind, Andy. In my experience most governments are still operating with 1950’s-style organizations and procedures.
I think the problems lie in everyone either wanting to shrink or grow government, rather than some relatively simple reforms that would give government workers something to strive for. David Frum had a comment about his border crossing into China – you could rate your border guard after you went through. Imagine how that little feature would work at the post office window! Imagine your MVD person got a bonus for how many licenses they issued. I don’t disagree with decentralization of government, in fact I think it would help because we could see what is working as smaller branches with similar functions experimented.
Oil spills were fixed after the Exxon Valdez by passing the Oil Pollution Act of 1990. The Act imposed greater penalties and planning requirements on industry, increasing federal response powers for spills, and strengthened state regulatory powers with dual-layer regulation. So I guess the questions are:
1. What about state government? Having lived in Louisiana, I expect that state had no interest in doing anything more than the minimum required of it. You can’t blame that on any national government.
2. What about the federal government? It took on more responsibilities to direct response efforts to major spill events. Did they ever obtain the capability or the funding? If not, where was Congress with money and oversight?
3. How adequate was BP’s contingency planning? If it was insufficient, why was it approved by federal and state authorities? If it was sufficient, then everything is going as planned.
“How adequate was BP’s contingency planning? If it was insufficient…”
From what I’ve read, BP’s contingency planning was peachy-keen from its point of view:
Dave,
I guess I see GM as still a 1950’s style organization. As for government, I agree. I’m most familiar with the DoD and I see everyday how the immovable object of a 1950’s bureaucracy meets the unstoppable force of change in our modern society. This topic comes up frequently in the military forums I participate in where I advocate for a reorganization on the scale of 1947 National Security Act.
sam, you’ve linked to references to environmental assessment and impact studies required under the National Environmental Policy Act. That’s a body of law that requires the government to study environmental impacts from major federal actions and a federal oil lease might be considered major.
There are independent environmental requirements in the Clean Water Act, that were beefed up by the Oil Pollution Act of 1990, which is where I think BP’s contingency planning would originate.
A system that protected the environment only from major federal actions, like leases, would not be sufficient to protect against oil spills from other sources (perhaps even near-shore leases?).
BTW/ I don’t think we’re going to learn something about the oil spill that is going to make the case for decentralization. Louisiana loves oil. I’ve been told they’re lobbying successfully to increase river flows down the Mississippi to push the oil from it’s shores, and probably towards Florida.