Pike River and the failure of deregulation

One of the central tenets of neo-liberalism is market deregulation. Nowhere has this been taken to the extremes of New Zealand. The idea of industry self regulation to saves costs, both for the companies themselves and the government, flies in the face of common sense. In the case of Pike River it was a major contributor to the disaster that cost 29 lives. The expectation that companies wouldn’t cut corners with safety in order to save money is not supported by reality or historical precedent. Rather it is a fanciful ideologically driven idea that assumes the profit maximising executives of a company will put their reputation and businesses long term future ahead of short term compensation and share holder profits. Yeah right. It didn’t work for the banking industry or the building industry and it doesn’t work for the mining industry. Tracy Watkins gives a good summation of the Royal Commission of Inquiry’s findings.

It is a damning indictment on a regulatory regime in New Zealand that has seen layers of prescriptive regulations peeled back to balance safety considerations against productivity.

In the wake of the leaky-buildings fiasco, and equally damning evidence from the Commission of Inquiry into the Canterbury earthquakes, our confidence in our public institutions and the rules they work under must now be seriously shaken.

Ultimately, the company is to blame. But Mr Key’s admission that had Labour Department inspectors done their job properly the 29 men killed at Pike River might still be alive is a watershed.

It is an acknowledgement that successive governments and the bureaucracy have failed workers in the worst possible way. It marks a turning point away from the orthodoxy of the past 20 years

Several commentators have also rightly pointed out this deregulatory drive happened under both National and Labour. Indeed Pike River opened under a Labour government with its poor design and grossly inadequate safety systems approved by a Department of Labour deliberately underfunded to provide proper mine inspection services. As Andrea Vance points out:

Pike, as a inexperienced new company, was able to obtain a permit to develop the mine with little scrutiny. They were allowed to construct a mine with just one exit – and a unsuitable ventilation shaft accessed only by a punishing climb up a vertical ladder.

By November 19 2010, there were just two mining inspectors, who were stretched thin. Departmental policy meant they did not audit health and safety procedures or analyse trends in data, but relied on physical inspections. Early in 2010 a mining steering group raised the alarm about the inspectorate ineffectiveness – but it was ignored. A request for a third inspector was not approved.

What was also evident from the Inquiry was the role the staff themselves played, unwilling to blow the whistle on safety issues because of concerns about their future employment. The concerted moves against unions that have accompanied deregulation are a major factor in this disaster. There was no strong union to perform the role of whistleblower and protect workers from corporate retribution. These two factors have contributed, along with a traditionally casual attitude amongst New Zealanders to safety, to New Zealand having one of the worst workplace accident records in the world.

Combine this with executives and a board unwilling to raise concerns because of its effect on production, share price and their own compensation and the conditions for a disaster were set.

As noted above, the deregulation of New Zealand business happened under Labour as well as National governments. It was the Rogernomics reforms of the 4th Labour government that started the ball rolling. Given there is a Labour Party conference this weekend it will be interesting to see if the Pike River Inquiry has any effect on Labour’s basic beliefs. As I have noted in other posts, for the last 30 years you could throw a blanket over National and Labour, so aligned are they on fundamental economic philosophy. You get a sense that the tide is beginning to turn, not just nationally but internationally, against neo-liberal principles. The current National government refuses to acknowledge this. Will the Labour Party?

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