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How the Richest "1 Percent" Keep Rewarding Themselves for Epic Failure

Posted: 04/ 7/11 08:34 AM ET

No, this was no April Fool's Joke, said the outraged Louisiana Attorney General Buddy Caldwell. Transocean, which owned and operated the doomed Deepwater Horizon rig, put out filings April 1, stating that it had actually had its "best year in safety performance" and was rewarding its executives with bonuses. Never mind those pictures of viscous Gulf water and oil-slimed wildlife. Only after The Daily Show with Jon Stewart, among others, eviscerated Transocean did the company announce that the safety bonuses would instead go to families of the workers who died in the rig explosion. Lest you think this is a full mea culpa, Forbes' Jeff McMahon points out that 5 executives will still get $650,000, bonus money that is not attached to safety goals.

Surely without the hue and cry these executives would have gotten away with it. Their attempt to snatch personal gain from the jaws of epic defeat is just the latest assault on common sense by the "1 percent", as economist and Nobel laureate Joseph Stiglitz describes America's super-elite in a new Vanity Fair piece called "Of the 1%, By the 1%, For the 1%."

He examines the roots behind the vast increase in income inequality in recent decades. It is surely no coincidence that during this same period, a new breed of power broker has emerged, players who shape public policy to fit their own, not fully disclosed, private agendas while purportedly working in the public interest. These unregistered agents of influence evade registration and oversight: Janine calls them shadow lobbyists. And when their policy influence leads to real-world trauma for the other 99 percent, these power brokers don't generally slink into obscurity. They continue demanding high-profile rewards, and often getting them.

Stiglitz describes well the intertwining of state and private power, a key theme in Janine's Shadow Elite:

The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most...[House] representatives...are members of the top 1 percent....are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift--through legislation prohibiting the government...from bargaining over price--it should not come as cause for wonder....Given the power of the top 1 percent, this is the way you would expect the system to work.

Stiglitz points out that a system gamed to benefit only that 1 percent is destined to sink us all, eventually, because it means America is squandering its productivity, efficiency, and much-needed infrastructure dollars. We would go a step further and say that this system, of, by, and for the 1 percent, is what paved the way for some of the greatest disasters of the new century. The BP-Transocean Oil Spill and the Wall Street collapse might never have happened without the promotion by shadow lobbyists of loose regulation and/or weak enforcement that benefited themselves and their elite brethen. Japan might not be facing a nuclear crisis, were it not for the fact that the very old reactors at the Fukushima Daiichi plant got an extension to keep operating despite safety concerns. That decision was a byproduct, critics say, of Japan's own gamed system known as amakudari, or "descent from heaven", a longstanding, widespread practice in which Japanese senior bureaucrats retire to high-profile positions in the private and public sectors.


A string of smaller, but still terrible disasters can be traced to weak regulation and/or spotty enforcement: the half-billion eggs that had to be recalled last year; a 2009 plane crash that killed 50 people, which Frontline traced back to the "cozy" relationship between the FAA and carriers, allowing some of them to operate flights despite safety violations; and several mine disasters that have killed dozens in recent years. A Washington Post analysis found that more than 200 former congressional staffers, regulators and retired lawmakers work for the mining industry as lobbyists, senior executives, or consultants. Those last two roles make it possible for top power brokers to shadow lobby - they go unregistered simply by evading formal registration and refusing the accept the title of lobbyist, even if lobbying is essentially what they are doing.

So what does all this have to do with bonuses? A signature feature of the shadow lobbyist era is not just a manipulation of public policy, but also an embrace of "failing upward". No matter the track record, the elite 1 percent seek more of the same. Transocean executives thought they deserved rich bonuses, as did their unabashed, deeply entitled peers on Wall Street, despite their staggering failures.

The CEO of mine operator Massey, who retired a few months back, is due to get a reported 12 million dollars, a year after Massey's Upper Big Branch mine exploded, killing dozens. And then there's egg producer Jack DeCoster, who's been called "Teflon Chicken Don." For years DeCoster has fought various workplace safety and environmental violations. Yet here's what one lawyer who sued DeCoster's company said about him, to Tribune reporter Andrew Zajac: "He gets fined and things happen to him, but he comes back. He always bounces back."

The insulation from failure is galling, to be sure, but it's much more than that. It is both an outrage and a clear and present danger. If executives and stealth power brokers face no repercussions for making risky bets or pushing the limits on safety to save a buck or working the system to their advantage no matter the consequences, what incentive do they have to act more responsibly in the future?

This week, at least, Transocean's attempt to rebrand its failure and reward its executives was stopped in its tracks by public shaming, most effectively by Jon Stewart. He suggested that if you follow Transocean's statistical "logic" on their 2010 safety record, then 1937 was actually a banner year for the company that made ... the Hindenburg. Even for the most brazen of the 1 percent, that is one brand name no one wants to their name next to. For a change, those trying to fail upwards got a much-needed come-down.

Note to Readers: Janine is tweeting more regularly. Follow her on Twitter @janinewedel.