Tuesday, November 06, 2012

Utterly, horribly wrong

In Question Time today the government was grilled over the Pike River disaster and its response. In the process, the Greens' Kevin Hague asked some pointed questions about the deregulation of health and safety and the incentives it sets. The Prime Minister's response was positively panglossian: the free market will ensure that all businesses are run in a safe manner:

Kevin Hague: Does he agree that the deregulation of occupational health and safety that occurred in the 1990s was the major factor in creating an environment where management at Pike River were able to ignore workers’ calls to improve safety; if not, why not?

Rt Hon JOHN KEY: No. Let us take a step back. The primary responsibility of any company, when it comes to health and safety issues, rests with that company, so a good employer is always going to make sure that their employees are safe in the workplace. The role of a regulator is someone to ensure that the company is fulfilling its obligations, not to fulfil those obligations for the company. The company itself must do that. In the case of Pike River Coal, the company utterly failed.

Kevin Hague: Does he agree that standard economic theory suggests that profit-maximising firms will always prioritise profitability over safety, unless the Government, as regulator, ensures the safety of workers?

Rt Hon JOHN KEY: I think that is a ridiculous statement. That is saying that a company is prepared to risk the deaths of its employees and the reputation of the company for the sole purpose of making money, and even from the most hardened socialist I find that something difficult to believe. In the case of the Pike River mine, let us argue just for a moment that the Pike River Coal company was halfway through its mining operations, and was a successful operation that was operating well. An explosion of the magnitude that took place back in 2010 would have then completely and utterly collapsed that company. That would have made no economic sense to anyone.

But as the report makes clear, this is exactly what happened at Pike River. A failing company ignored health and safety and risked the lives of its workers in a desperate effort to stay afloat. There are now 29 corpses rotting in a mine as evidence that the Prime Minister's rosy-eyed view is utterly, horribly wrong.

More generally, in an environment where workers take the risks and management reap the profits, where directors face no legal risks for gambling with lives, and where the business community sees health and safety as "red tape" to be cut or ignored, leaving it to the market is a recipe for disaster. Left to themselves, companies will systematically underestimate risks, cut corners, and needlessly expose their workers to danger - because the people making those decisions aren't endangered either personally or legally from the consequences. Even the risk of going bust in a catastrophic failure is no incentive, because shareholders carry the can for that. As for losing their job when things go wrong, IBGYBG, and the Old Boy network will just get you another one.

Unfortunately, with a Prime Minister who thinks that safety can just be left to the market, it is unlikely that we are going to see the sort of changes we need to fix the fundamental problems in our health and safety regime exposed by Pike River. Oh, they'll make some noise, and do some spin - but at the end of the day they'll leave in place the deregulated framework which just cost 29 lives. Which will mean more corpses further down the line.