Rich Tucker

Calvin Coolidge once announced that “the business of America is business.” That’s not as true today, when American businesses are often portrayed as the bad guys, causing problems that require big government solutions.

Consider Steve Coll’s new book “Private Empire,” about ExxonMobil.

Coll doesn’t seem to like Exxon much. Its free market approach to producing and delivering energy seems to rub him the wrong way. Yet for its part, Exxon comes across in this book as the Greta Garbo of companies: It just wants to be left alone to operate in a free market, produce energy and make piles of money.

That doesn’t happen, of course. On issues ranging from how much oil the company controls to where and how it may explore for oil to whether global warming is really a concern, Exxon is constantly bumping up against U.S. government regulators, legislators and administrators.

Time and time again, though, Exxon’s decisions are better than the U.S. government’s decisions. In the 1990s, for example, Washington was encouraging oil companies to use a chemical called MTBE to increase the octane rating in gasoline.

“Nobody had studied MTBE’s health effects, however,” Coll writes. “Later, based on laboratory tests involving rats, the E.P.A concluded that MTBE was a ‘potential human carcinogen at high doses.’”

The government reversed course and announced that MTBE should be removed from gasoline. Hundreds of people later sued ExxonMobil over its use of MTBE “even though it had been encouraged by the government to put MTBE into its gasoline in the first place,” Coll writes. The legal system holds companies accountable for their actions. But nobody is able to hold the federal government accountable.

Coll also stumbles across the fact that private industry is more effective than government ownership. For example, in recent decades most countries have nationalized their oil. But without the pressure of a free market, they aren’t as skilled at developing their supplies. “Not all oil-endowed countries had the capacity or the political and economic stability to build and manage a state-owned oil company that was competent in all sectors of the business,” Coll writes.

That seems to understate the case. The pressure of having to earn a profit even though so much of the world’s oil is off limits drives private companies such as Exxon to find better ways to make money. Having a territorial claim on a natural resource allows state-owned companies to be less efficient.

Then there’s safety. Coll pokes fun at Exxon for the company’s response to the Exxon Valdez oil spill. The author seems amused, for example, that meetings would begin with a “safety minute” involving discussions of emergency procedures.

But such steps were really driven by Exxon’s conviction that “a fanatical devotion to safety in complex operational units such as refineries could lead to greater profits because the discipline required to achieve exceptional safety goals would also lead to greater discipline in cost controls and operations,” as Coll puts it.

That approach seems to have worked. After Valdez, the company mostly avoided major mishaps. The one slip Coll cites became a major disaster only because a gas station owner failed to follow proscribed safety procedures. And that’s not to mention that safe employees require less time off and are more efficient, or that a company that avoids accidents also sidesteps lawsuits and lost time.

Coll concludes the book by highlighting the fundamental difference between, on one hand, a government and on the other a company that needs to survive in a market. In 1999, both Exxon and the federal government took in more than they spent. Then they went in opposite directions.

“In an era of terrorism, expeditionary wars, and upheaval abroad, coupled with tax cutting and reckless financial speculation at home, one navigated confidently, while the other foundered,” he writes. By 2011, when credit rating agency Standard & Poor’s downgraded the U.S. government, “the net cash flow of the United States--receipts minus expenditures--was approximately negative $5.7 trillion. ExxonMobil’s net cash flow from operations and asset sales during the same period was a positive $493 billion.”

If only we could bring some of that market discipline to bear on the government, we’d be better off.


Rich Tucker

Rich Tucker is a communications professional and a columnist for Townhall.com.