Taking Consequences Seriously: A Response to Yascha Mounk

Taking Consequences Seriously: A Response to Yascha Mounk

Daniel Greenwood: Taking Consequences Seriously

For more, read Yascha Mounk’s original article “Nuclear Disaster and Liberal Democracy” here. Read an earlier exchange between Daniel Greenwood and Mounk here, and a letter from Marco Roth to Mounk here.

Yascha Mounk is wrong to assume that Japan?s TEPCO would be fully liable for the damages caused by a nuclear power plant meltdown. I?m no expert on nuclear power liability rules, but a quick Internet search suggests that, like the U.S. nuclear industry, Japan?s operates under protection from the ordinary tort rules that might hold it responsible for injuries that it has caused. Apparently TEPCO will be entirely exempt from damages if the earthquake and tsunami are deemed ?a grave natural disaster of an exceptional character?; even if that provision does not apply, all damages above ¥120 billion (about $1.5 billion) per plant will be assumed by the government, or about $.12 per square foot in the original twelve-mile [Update: now nineteen-mile] evacuation zone?an obviously inadequate amount if any permanent property damage results, even ignoring collateral damage to Japan?s economy, which must already be far above that amount from rolling blackouts alone.

Under ordinary U.S. tort law, companies are not responsible for the property damage or injuries they cause, unless the company failed to take the precautions that a reasonable person would take under the circumstances. So if reasonable companies build nuclear plants despite a small risk of devastating disaster, ordinary tort law would not hold the power company responsible if the predicted disaster happened. But the U.S. nuclear power industry was not willing to rely on this exemption alone.

Instead, it demanded stronger protection from legal liability under the ordinary tort regime, and the insurance industry was unwilling to provide insurance for claims over $60 million. We have nuclear power plants only because Congress created a special tort regime in the 1957 Price Anderson Act, which included a taxpayer-funded insurance plan for claims between $60 million and $500 million and the elimination of any liability above that. Since 1975, the act has been repeatedly amended, ultimately eliminating both the liability cap and the taxpayer funding. Today it completely displaces ordinary state tort law, providing instead for a federal scheme consisting of no-fault payments to injured parties of up to about $12 billion, to be paid by the entire industry without regard to whether a particular nuclear operator caused the damage. The full value of the subsidy to the industry and the exact scope of the special privileges it provides in case of a catastrophic accident remain controversial, in part because the act does not clearly explain what will happen if damages exceed the cap, as they certainly would if any economically significant area were rendered uninhabitable. (For comparison?s sake, Google recently paid $1.8 billion to buy a single building in Manhattan; the 9/11 compensation fund paid out approximately $7.049 billion to survivors of the 2880 individuals killed and 2680 people injured in connection with the attacks or the rescue operations).

In any event, every nuclear power plant now operating started construction before the 1975 reforms, and only one is currently under construction. Apparently nuclear power is simply economically infeasible without massive subsidies, just as it requires special exemptions from democratic processes to overcome near-universal local opposition.

The larger point is that Mounk?s framing of the issue is misleading. The question of how countries respond to the risks of nuclear power is not an issue of neoconservative willingness to sacrifice a few (rarely themselves) for the good of all or an alleged liberal queasiness in the face of calls to sacrifice. Nor does it make sense to separate it from how those risks were created in the first place. The conflict between chicken-hawks and chickens is important in some policy questions, but it simply isn?t doing much work here.

Profit-driven institutions faced with a liability regime that holds them responsible for minor problems but relieves them of responsibility for major blow-ups face strange incentives: to prevent minor problems and hope for the best on large ones. Denial is nearly always the most profitable approach to any expensive danger that is most likely to occur under someone else?s watch.

We have created this regime in the nuclear power industry by instituting liability caps, in the financial industries by implicitly promising to bail out institutions that present systemic risk (?too big to fail?), and in the corporate sector in general by guaranteeing that only the corporate entity, not its human participants or those who profit from it, will be liable for injuries it causes. The effects are compounded by the collapse of the tradition that captains should go down with their ships. Executives who preside over minor disasters face serious career consequences. Those who are responsible for major ones have experience that makes them highly valuable to the next generation of firms operating under the same perverse incentives.

The real issues are the limits of profit and the strength of alternative motivators, and cultural and institutional structures that either reward self-centered short-termism or do not. Here neocons and Mounk?s individualist liberals are on the same side, opposed to both the progressive Left and more traditional conservatives: both operate on a thin and unrealistic model of human psychology, and neither takes the consequences of our interconnected web of actions seriously. Our economic institutions and, in recent decades, our politics too often reward a kind of solipsism that is, in the longer term, incompatible with economic success and, as the global warming crisis suggests, perhaps even survival.

Private and public sector leaders who believe that they need not serve any value but personal enrichment are leaders who are already corrupt, even if they have not yet found a way to steal without being caught. In the private sector, we have almost lost the ability to name, let alone condemn, the phenomenon: there seems to be no way to say that it is simply wrong for electric company executives to choose to risk nuclear disaster rather than promote conservation and sustainable power sources, for a banker to profit by transferring risk to people who do not understand it, for an executive to prosper by cutting costs even if it diverts attention from the devastating consequences of a highly unlikely accident, or for publicists to seek to pervert the public discourse in order to profit by changing the rules of the game. In the public sector, our Supreme Court, in both the Bellotti and Citizens United cases, has declared this kind of corruption a human right central to the concept of ordered liberty, while our politicians have gleefully joined in the pandering to short-term financial interests that these Supreme Court decisions necessarily produce. We have built a system that excels at pretending to be farming, while in fact it is mining: it is nearly always cheaper in the short term to consume the future than to build for it.

Capitalism cannot long survive without trust, honor, and honesty. It is not possible to invest for the future if competitions are invariably won by those who exploit it instead. Yet markets and electoral politics alike inherently provide extraordinary rewards to those who find novel ways to exploit trust and avoid the expense of providing for the next generation. As our institutions? ability to make small mistakes with large consequences grows, our future is threatened: not only nuclear power plants, but nuclear bombs; financial meltdowns; runaway political movements based on selfishness, intolerance, and exploitation; and ecological disasters.

Only rarely can one profit by voluntarily disarming in an arms race, by reducing fishing in a common fishing ground, by refusing campaign contributions or declining to lobby for private interests, by adopting expensive conservation to reduce global warming, or by advertising a product?s shortcomings more honestly than the competition. Investing for the future, or funding schools for the next generation, inevitably means fewer ?profits? right now. Yet those are the behaviors upon which our survival?economic and literal?depends. Neither neoconservative willingness to ship other people?s children abroad to kill for low oil prices nor neoliberal idolatry of the wonders of the market is responsive to our real problems.

Wurgraft | University of California Press Lima