Publisher's Note — June 16, 2010, 8:51 am

The Gulf and Our Oily Campaign-Finance System

John R. MacArthur is publisher of Harper’s Magazine and author of the book You Can’t Be President: The Outrageous Barriers to Democracy in America. This column originally appeared in the June 16, 2010 Providence Journal.

As the BP oil spill continues to flood the Gulf of Mexico, I find myself asking if such an environmental catastrophe might constitute the sort of “creative destruction” that right-wing market fundamentalists love to cite when they defend “free markets” and capitalism.

Creative destruction is the term coined in 1942 by the brilliant Austrian economist Joseph Schumpeter to describe certain not-so-benign effects of the market system, and the right wing has clung to the concept ever since. In the right’s oversimplified version of Schumpeter’s idea, capitalists function as something akin to artists who must not be restrained by governments lest they lose their creative verve and nerve. Of course, such unregulated enthusiasm will from time to time lead to the destruction of old-fashioned, cherished ways of life and work. But these trades and practices were headed for the ash heap anyway, and from this “industrial mutation,” as Schumpeter put it, will arise, well . . . something wonderful.

So far, however, I can’t seem to find the good, creative or otherwise, in the tide of petroleum now well on its way to suffocating the Gulf and its surrounding coastline. While waiting for the good news, I have to content myself with trying to understand the bad.

For one thing, none of what has happened over the past month — the absurd obfuscations by BP and the federal government, the lack of a plan to address the disaster, the so-far toothless denunciations of “big oil” — should surprise anyone. The corruption of the bureaucrats assigned to “regulate” oil drilling on public lands is an old story dating back to the Teapot Dome scandal, in the early 1920s, when Albert Fall, Warren Harding’s secretary of the interior, took bribes from oilmen in exchange for granting them leases without competitive bidding. As Brian Urstadt explained last year in Harper’s Magazine, the descendants of Fall at the Interior Department’s Minerals Management Service were, as Annie Oakley sang in “Annie Get Your Gun,” just “doing what comes naturally.”

Indeed, given the suspiciously lax method by which the MMS (and the American people it is supposed to serve) are compensated by oil companies for the privilege of drilling on public land, it’s amazing that we haven’t had more Deepwater Horizon disasters. Under an arrangement conceived in the Clinton administration and greatly expanded during the G.W. Bush administration, MMS has been collecting large quantities of oil — called “royalty-in-kind” — instead of cash royalties from the private drillers. In turn, the MMS is supposed to sell the oil for real money that would benefit citizens. The trouble is, as Urstadt reported, there’s no credible evidence that royalty-in-kind produces as much revenue as the old-fashioned cash-payment system.

Meanwhile, there’s much evidence that MMS officials like Lucy Denett, who resigned in 2008 after two subordinates were convicted of conflict-of-interest charges, are up to no good. Dennett’s deputy, Gregory Smith, “also resigned,” wrote Urstadt, “after the inspector general alleged that Smith had taken bribes from oil companies, slept with his subordinates, and had cocaine delivered to his office.”

Is this what the market-minded right-wingers have in mind when they dream of creative destruction? Perhaps not, but creative uses of time on the public dime were rampant at the MMS. Evidently civil servants can be even more “creative” than a businessman in a beret. According to Urstadt, “MMS employees were not just figuratively in bed with the oil industry, having ‘partied’ with their private-sector counterparts, earning some the nickname ‘the MMS chicks.’ ”

The Bush family, given its long history in the oil business, would understandably not want to interfere with the creativity of the likes of BP and ExxonMobil. What’s possibly more troubling is that nothing seemed to change at Interior or the MMS, besides a few names in top-level positions, after Obama and his supposedly more environmentalist crew took command. But in Washington, “green” still mainly means money in the form of lobbyist fees and campaign contributions. So why mess with a good formula?

Interior Secretary Ken Salazar, a former senator from Colorado, can make a scapegoat out of former MMS chief Elizabeth Birnbaum, but nothing short of his resignation would indicate a change in the administration’s fundraising priorities. As Obama’s chief of staff, Rahm Emanuel, has no doubt reminded the president, Colorado is rich in both fossil fuels and political donations from energy companies, so why would Obama want someone running Interior who comes from a state with little or no interest in coal, oil, or natural gas? Over the latest election cycle, from January 2009 to May 2010, the total contribution of oil and gas companies to the Democratic Party was $3.7 million.

Nevertheless, Obama says he’s determined to punish BP, plug the leak, and make sure that it never happens again. Two weeks ago, his spokesman, Robert Gibbs, described a president “enraged at the time that it’s taken” to halt the underwater oil gusher. How did Gibbs know this? Because he’s seen Obama’s “clenched jaw” in various meetings.

Yet Obama seemed utterly at ease — practically slack-jawed — on March 31, when he announced the expansion of offshore oil drilling, this to the dismay of his faithful environmentalist supporters.

No matter. Bipartisan Obama, the consummate corporate Democrat, could bask in the reluctant praise of Senate Minority Leader Mitch McConnell, who called the plan for increased drilling a “step in the right direction.”

What has to change? To be sure, Americans must end their addiction to SUVs and other monster vehicles. The U.S., with one-twentieth of the world’s population, gobbles up one-fifth of world oil production. But Americans also need to stop electing regular Republicans and Democrats like Bush and Obama who will never ask them for any sacrifices, apart from money at election time.

So far, the only sacrifices I’ve seen are the ones made by the oil-rig workers who died in the Deepwater Horizon explosion. They were sacrificed to a two-party oligarchy and a campaign-finance system that are leading us toward a very creative self-destruction.

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