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Shadow Elite: Think BP's The Bad Guy? Think Bigger, Way Bigger

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By Linda Keenan and Janine R. Wedel

Coast Guard Captain leading hearings Wednesday: "It's my understanding that [a blowout preventer is] designed to industry standard ... manufactured by the industry, installed by the industry, with no government witnessing or oversight of the construction or installation. Is that correct?"

Regional supervisor, federal regulator MMS: "That is correct..."

That staggering statement of regulatory impotence was characterized this way by Sen. Bill Nelson in the Wall Street Journal: "If MMS wasn't asleep at the wheel, it sure was letting Big Oil do most of the driving." It is tempting to hope that Big Oil's days in the driver's seat are over, now that the Obama administration has ordered that the Minerals Management Service, which oversees offshore drilling, be split up, after critics said the agency was too close to the industry and had an inherent conflict of interest. Realists are highly skeptical. And in our view, it is shortsighted to focus public ire on one business and one massive, deadly disaster, even as HuffPost yesterday spoke to another whistle-blower alleging egregious practices.

This story lays bare the far-reaching (and largely unnoticed) emasculation of government regulatory power, as it has succumbed to corporate agendas over the past several decades. Janines examines this, and other disturbing trends, in her book Shadow Elite.

And it's imperative that we dissect the modus operandi of BP, its elite hired guns, assorted patrons, and compromised, enfeebled regulators, to better spot their tactics being used across government, corporate America, and Wall Street. This pernicious M.O. could be detected in both the recent Upper Big Branch Mine disaster, the bank industry collapse and the bailout that followed. So we should ask ourselves not just "how did these catastrophes happen?" but also, "how do we spot the next one waiting to happen?"

There was much finger-pointing during Congressional grillings this week: politicians pointing fingers at executives from the 3 companies involved in the disaster, and the executives pointing fingers at each other. But those politicians, and our entire leadership, should also point a finger at themselves, for allowing private industry to increasingly devour public power, and gut regulatory responsibility.

It traces back at least to the Reagan era, but soon politicians from both parties would seek to redesign governing, including adopting the push for "small government", and often deregulation. Ironically, this drive led them to create a bigger, far less transparent "shadow government" -- by steadily passing government work, cache -- and, crucially, power -- over to business interests. One result: the lines between business and government have blurred, making it hard to figure out who's in charge, or what an agency even is. Case in point: the MMS. Was MMS a government regulator or an arm of the industry? You be the judge of this description, from the Wall Street Journal.

It is supposed to be a watchdog that halts drilling when it spots unsafe behavior. But it is also supposed .... to generate government revenue from drilling on government lands.....Of MMS's fiscal 2010 budget of $342 million, nearly half comes from the oil industry....

It's this conflicted mandate the White House is trying to clear up, with the move this week to split those oversight and revenue functions.

Another result of shadow government's rise is the drain of the government's "brain". The expertise a civil servant should possess has been increasingly privatized, and regulatory power is decimated. More to the point, businesses aren't just sidestepping or fighting regulators. Their M.O. is to try to make themselves the de facto regulators of their own self- interested conduct, the result of which is made devastatingly clear in that exchange at the beginning of this post.

More from the Journal:

The agency...
--"doesn't write or implement most safety regulations, having gradually shifted such responsibilities to the oil industry itself for more than a decade."
--said offshore drilling is so complicated that only industry can really regulate itself.
--let the industry devise its own solutions to problems.
--let a trade group take over the role of "telling companies what training was necessary for workers involved in keeping wells from gushing out of control".

In its defense, the agency "pointed to a 1996 law that encouraged federal agencies to 'benefit from the expertise of the private sector' by adopting industry standards." This is a classic case of "reinventing government" gone awry.

With government power gutted, a new breed of power broker has stepped in to help companies like BP push their interests, and, at the same time, flex their own agendas. These are not mere "lobbyists". They have far more access than your garden variety K-Street operator -- and they can be found in both political parties. In Shadow Elite, Janine calls them "flexians", top players who move in and out of government, corporate, and think tank roles, gathering exclusive information at each stop, and using that privileged asset to benefit themselves and their allies.

BP boasts a high-wattage roster of flexians (or near-flexians) who've served on advisory boards and panels. Some were reportedly paid $120,000 a year to ... "advise"? The Washington Post lists former House majority leader Thomas Daschle (D); two former GOP senators, Warren Rudman and Alan Simpson; Bush EPA administrator Christie Whitman; Clinton deputy attorney general Jamie Gorelick; Leon Panetta, [before becoming] -- President Obama's CIA director. Newsweek adds George Mitchell, now Obama's Middle East envoy.

These are perhaps the most relevant titles, but a complete accounting of all the roles that these players have held in government, businesses and think tanks would run a good three dozen long. So what does a company get when it hires someone at the level of say, Tom Daschle? The fact is that this kind of influence is incalculable and largely unaccountable.

And what's the effect of these boards,"independent" panels, and advisory councils anyway? They might give BP a way to have power brokers on board without the appearance of actual lobbying. And they also might help make BP look like the model corporate citizen, when the record suggests significant lapses. Newsweek reports that BP took some of their high-powered advisory board members on a helicopter ride out to the Gulf of Mexico to "demonstrate safeguards". Christie Whitman told the magazine: "we got a sense they were really committed to ensuring they got it right.." Having such a repertoire of appearances -- and the ambiguity surrounding these players' activities -- lends cover. This way of doing business is a hallmark of the shadow elite.

This playing with appearances augments an ongoing strategy by BP to rebrand itself as "Beyond Petroleum". For more than a decade, they have been promoting bold marketing campaigns, eco-friendly-seeming logos, and co-opting, critics say, environmental language. It worked -- Mother Jones cites a 2007 survey that found that people thought BP was "more green" than any other oil company. But even though they have indeed plowed money into solar energy, activists say they can't greenwash away their spotty safety record and aggressive exploration efforts.

A few government officials or investigators did try to demand truth -- and consequences from BP. One EPA official a few years back threatened to "debar" BP from government contracts if it didn't submit to tougher regulation. The problem: Newsweek says BP is a top Pentagon fuel supplier for Mideast military operations. This is yet another result of the gutting of government power: the increasing, and quite possibly dangerous reliance on multinational businesses for mission-critical government functions.

Various industries consolidated over the 80's and 90's, and that's left a handful of enormous companies contracting in countless corners of the government, crucial corners. As Newsweek puts it, BP was "the oil-company equivalent of "too big to fail".

And that official was well aware of BP's insider power. She said "'when a major economic and political giant tells you it has direct access to the White House, it's very intimidating.'" She felt powerless, because she assumed no matter what she did, BP would just get a national-security exception to keep selling the oil.

This civil servant and a handful of other standouts lost in their bid to clamp down on BP, hobbled by a system that is so clearly tilted in favor of business, and to unaccountable power brokers. In the era of the shadow elite, they learned an unfortunate truth: that some companies are not just "too big to fail", but also "too untouchable to punish".

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