The Fukushima nuclear disaster is causing Americans to begin to ask important questions about the safety of our own nuclear reactors. Meanwhile, in Japan, many people are making comparing their government’s response to the US experience with Katrina or the BP oil spill. Yet the lead-up and fall-out of Fukushima is eerily reminiscent of the conditions that led to the US financial crisis of 2007. This suggests we might ask where the makings of the next crisis—financial, environmental, political, security-related—might be: where else do we find the same conflation of causes?
Here are some similarities:
A collusive relationship between regulators and industry, facilitated by mobility of staff between the two, facilitated a group-think consensus that downplayed risks and placed great faith in industry self-regulation.
As in the case of financial firms at the center of the American financial crisis, a company—TEPCO—was implicitly understood to be Too Big To Fail. Hence the moral hazard problem was enormous.
Academics largely failed to serve as objective and independent sources of expertise: in both crises, elite academics generally sided with the industry and testified in court cases on behalf of the industry, thus creating a sense that criticisms or doomsday scenarios were the work of less elite non-experts who did not really understand the science.
Prior to the crisis, there was a lack of appreciation on the part of the general public of how ordinary actions fed the vicious cycle that in the end endangered us all. Just as it easy to demonize Wall Street and forget the role of ordinary Americans in gaming the sub-prime system, it is easy to forget how our own vociferous appetite for energy fed this beast.
The ultimate cause of each crisis then, is the repeated lack of imagination and courage–on the part of -the executives who might have invested in safer technology, the middle level managers who might have made different recommendations to their higher ups, the bureaucrats who pushed the reports along rather than risk their reputations on challenging the group think that said the industry was totally safe and should be left alone, the professors who might have asked different questions, lawyers who fashioned logically defensible but ultimately counterproductive arguments on behalf of their corporate clients, the journalists who didn’t push too hard, the citizens who might have used the power of the purse more effectively.
The consequences too have some similarities:
The costs to ordinary citizens’ property, physical and psychological well-being, and quality of life will be long-lasting and on-going—perhaps for generations.
A government bail-out is eminent and it is likely that most of the large financial players—the executives, bond holders, and even shareholders—will end up getting off much better than they might have while victims will receive much less than they deserve.
The costs of this bail-out to the national treasury, and its implications for the long term economic health of the country, will be enormous.
Although there is public outrage, the outrage still seems largely unproductive: unfocused, lacking in creative leadership about what reforms to demand in return for the significant public assets this disaster will cost, and tainted by a kind of nationalist rhetoric that deflects attention away from the ongoing institutional and political causes of the crisis.
One of my conclusions after watching with despair the hollowing out of the Dodd-Frank Act and now the Japanese failures at Fukushima is that ordinary citizens and market participants must stop waiting for the government to make things safe. The interests involved are such that politicians are probably the most unlikely sources of leadership. Instead, we should start thinking about our markets, our environment, and our security more generally as something akin to a public park—a commons that we value together and that we all need to pitch in to maintain from whatever vantage point we participate in it—whether as consumers, traders, regulators, scholars, and so on. As the old slogan goes, if the people lead, the leadership will follow. But for those of us—that is almost all of us—who have some measure of responsibility for these crises, daily pressures often get in the way—a fear of risk-taking, a lack of imagination, or just the pressures of time and the fact that it is quicker and easier to go along than to buck a trend. But what if we began to see that the millions of small choices we all make in those moments in the aggregate are challenging our collective security?
In this respect, one of the only encouraging trends coming out of Japan’s nuclear disaster is the efforts ordinary citizens and corporations alike are making to conserve electricity (even in the almost unthinkably tone-deaf suggestion by TEPCO that it now will have to raise rates to make up for lost revenue). Ordinary people are moving beyond retrospective blame and starting to do what they can—from the little corner of the problem they can influence, to make change and collectively it is making a big difference.
It will be interesting to see what the next step will be. Will some TEPCO employees be inspired to wage a battle within the company to steer a more socially responsible course? Will judges, begin to think about their own accountability for public security when faced with a lawsuit by a citizens’ group? Will bureaucrats inside the relevant ministries begin to think about what creative work they can do, from where they stand inside the bureaucracy, even if they imagine that there is a risk that it might come at some personal cost to their careers? Will academics think more carefully about their public responsibilities in defining topics of research and evaluating the evidence? Will journalists begin to see more independent, and meaningful information about the causes, dangers, and alternatives to this disaster might anger some corporate interests but also will gain them the respect of readers? As with the financial crisis, there is an opportunity here, amidst the devastation.