Safety on the Cheap

By Robert Reich, Robert Reich's Blog

16 March 11

an we please agree that in the real world corporations exist for one purpose, and one purpose only - to make as much money as possible, which means cutting costs as much as possible?

The New York Times reports that GE marketed the Mark 1 boiling water reactors, used in TEPCO's Fukushima Daiichi plant, as cheaper to build than other reactors because they used a comparatively smaller and less expensive containment structure.

Yet American safety officials have long thought the smaller design more vulnerable to explosion and rupture in emergencies than competing designs. (By the way, the same design is used in 23 American nuclear reactors at 16 plants.)

In the mid-1980s, Harold Denton, then an official with the Nuclear Regulatory Commission, said Mark 1 reactors had a 90 percent probability of bursting should the fuel rods overheat and melt in an accident. A follow-up report from a study group convened by the Commission concluded that "Mark 1 failure within the first few hours following core melt would appear rather likely."

Sound familiar?

The National Commission appointed to investigate the giant oil spill in the Gulf of Mexico last April recently concluded that BP failed to adequately supervise Halliburton Company's work on installing the well.

This was the case even though BP knew Halliburton lacked experience testing cement to prevent blowouts and hadn't performed adequately before on a similar job. In short: Neither company bothered to spend the money to ensure adequate testing of the cement.

Nor did Massey Energy spend the money needed to ensure its mines were safe.

And so on.

Don't get me wrong. No company can be expected to build a nuclear reactor, an oil well, a coal mine, or anything else that's one hundred percent safe under all circumstances. The costs would be prohibitive. It's unreasonable to expect corporations to totally guard against small chances of every potential accident.

Inevitably there's a tradeoff. Reasonable precaution means spending as much on safety as the probability of a particular disaster occurring, multiplied by its likely harm to human beings and the environment if it does occur.

Here's the problem. Profit-making corporations have every incentive to underestimate these probabilities and lowball the likely harms.

This is why it's necessary to have such things as government regulators, why regulators must be independent of the industries they regulate, and why regulators need enough resources to enforce the regulations.

It's also why the public in every nation is endangered if the political clout of its biggest corporations - BP, Halliburton, Massey, GE, or TEPCO - grows too large.

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.