Friday, March 18, 2011

No "black swans" near Sendai, but fortunes and crimes

Today's Boston Globe contains an article by Jason Clenfield (Bloomberg News) with some interesting background to the ongoing nuclear crisis in Japan. Here is a key paragraph:

"Nuclear engineers and academics who have worked in Japan’s atomic power industry spoke in interviews of a history of accidents, faked reports, and inaction by a succession of Liberal Democratic Party governments that ran Japan for nearly all of the postwar period."

(Read the rest of the article here.)

A tsunami is not a "black swan" -- see my blog about this from last Tuesday. We know these waves happen, and we especially know they happen near Japan (the word tsunami is, in fact, Japanese, meaning "harbor waves"). But now we know for certainty that the danger to the cooling system of nuclear plants from tsunamis was also foreseen and officially reported (see above article) to many governments, including Japan's. Until we reward the whistle blowers and others who report dangers and advocate proper safety, and until we punish those who fail to listen to, or who smear these truth-tellers, we will continue to face disasters that are foreseen and a largely avoidable.

One of my favorite sayings goes:

Behind every great fortune lies a great crime.

(This is an adage; I'm not suggesting that it is always literally true; however, I think that generally it's a very useful guideline for analysis.)

Tokyo Electric, which owns the compromised power plants, no doubt made a great fortune, as has G.E. which designed them, and built some. Investors also made lots of money. As the article referred to above shows, a lot of this success was based on falsifying safety reports and cutting corners with respect to backup and other safety issues. Also, regulators didn't regulate. If they had, then Tokyo Electric might have gone under financially decades ago as a result of at least one major defect which was covered up. But T.E. was too big or too important to fail. Sounds familiar?

What we see here is what we saw in the Savings and Loan and the Subprime Mortgage crises: profit is individualized but risk is socialized. The wealthy make the big bucks and leave a mess for the rest of us to clean up. (I don't think too many stockholders or execs of Tokyo Electric are risking their lives taking water to the fuel-rod pool in reactor #4.) This is exactly why so many of the arguments given by conservatives to justify large profits and executive compensation are wrong. Maybe -- maybe -- people who take risks deserve to be rewarded, but in our society, the capitalists claim the rewards while the risks are socialized.

(Take the company seeking minerals, which cuts off the top of a mountain and throws it into surrounding valleys, woods and streams. If they don't find what they want, their expenses are deductible; if they do, they make a fortune; in either case, we have to clean the pollution and take care of the people who are sickened or who lose their homes or livelihoods because of the ruined countryside.)

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