Is poor safety ‘endemic to capitalism’?

 

The far left is very concerned about safety standards at aircraft giant Boeing. They blame labour conditions and the profit motive.

Some people get their humour fix from British comedy. Some get it from American slapstick. Some get it from South African stand-up, which has been retreading racial stereotypes for 40 years.

I get it from reading the Daily Kos, Alternet, Mother Jones, and TruthOut. These sorts of publications are the Breitbart, Daily Mail, Epoch Times, and NewsMax of the left.

They’re terrible, and often very funny. Unfortunately a great number of people take them seriously.

A case in point is an article on TruthOut, penned by Susan Kang, an associate professor of political science at the City University of New York, on Boeing. It was written in response to Boeing CEO Dave Calhoun’s announcement that he, along with the company’s chairman and the head of the commercial aeroplane unit, would step down.

Calhoun is the successor of Dennis Muilenburg, taking over in 2020 after the latter was fired in the wake of two fatal crashes of Boeing’s 737-MAX aircraft. The company has been in turmoil since the first of those crashes in 2019. It suffered multiple other safety incidents involving 737-MAX, culminating in an in-flight door plug blowout in January 2024.

These events led to multiple groundings and $31 billion in losses for Boeing. The company has also had multiple design and production issues with its newest aircraft, the 787 Dreamliner.

Red lens

Kang argues that safety issues are not unique to Boeing but are ‘endemic to capitalist society’.

‘Heads are rolling at Boeing,’ she wrote, ‘but new leadership doesn’t alter the labor conditions and profit motives that erode safety.’

Kang’s academic focus is on the labour movement, so it is hardly suprising that she would see the events through the red lens of left-wing politics.

Let’s not quibble about facts: Boeing has not covered itself with glory in the production of the 737-MAX, or in its response to the fatal crashes and other safety incidents. Something clearly went very wrong at Boeing, both in terms of individual leadership and corporate culture.

It is also not disputable that much of the blame can be laid at the door of a series of management teams who prioritised earnings over good engineering. Instead of designing a modern, high-tech replacement for the 727, 737, and 757, for example, Boeing opted to squeeze more revenue out of slightly updated 30- and 40-year-old designs.

This came back to haunt them, all the way to $2.5 billion in criminal penalties.

Kang’s analysis goes further, though, and goes on to blame poor working conditions and capitalism in general.

Simplistic, predictable

The argument is as simplistic as it is predictable. Successive governments, on both sides of the political divide in the US, are guilty of ‘dismantling regulatory oversight’ that ‘increasingly delegate[d] safety monitoring and oversight to private companies’.

Workers were reluctant to make their concerns about safety known to upper management, both because they didn’t understand the safety reporting systems and because they feared retaliation if they did so. Kang calls this an ‘anti-worker culture’.

She concludes that ‘[the] breakdown of consumer safety measures is endemic to the neoliberal capitalist pursuit of profit in the provision of public services, and to an employment regime that continually fails to provide adequate protections for workers’.

‘Provision of public services’? Since when is building aircraft a ‘public service’?

The absurdities of Kang’s analysis don’t end there, however.

Fails to explain

She fails to explain why Airbus, Boeing’s larger rival, whose shares trade on multiple stock exchanges in Europe, hasn’t been crippled just as badly by the ‘neoliberal capitalist pursuit of profit’.

She fails to explain that the rolling heads at Boeing after $31 billion in losses implies that just as much as the profit motive drove poor management decisions in the past, it is also the profit motive that is forcing Boeing to try to fix its production processes and rehabilitate its severely damaged reputation.

She fails to explain that the neoliberal capitalist market itself has also punished Boeing severely.

Its share price peaked on 25 February 2019, two weeks before the first of the fatal 737-MAX crashes, at over $440. A year later, it bottomed out at a mere $95. Capitalists had yanked 78% of all the capital that they had invested in the company.

Granted, Airbus also took a massive beating at the time because of the pandemic, but while Boeing’s share price is still in the doldrums ($183, last I checked), the Airbus share price has since exceeded its early-2020 peak to reach an all-time-high of €168, at last close.

Market share

She also doesn’t explain that Boeing’s travails have had a profound influence on the relative market shares of it and its main rival, Airbus.

‘What used to be a duopoly has become two-thirds Airbus, one-third Boeing,’  Richard Aboulafia, the managing director of AeroDynamic Advisory in Washington, D.C. told the New York Times, ‘A lot of people, whether investors, financiers or customers, are looking at Airbus and seeing a company run by competent people. The contrast with Boeing is fairly profound.’

Aboulafia is also the wit behind another great line, quoted by CNN, about the outgoing Boeing CEO, Dave Calhoun: ‘He’s the very best CEO that Airbus has ever had.’

If building aircraft had been a ‘public service’ produced by governments, customers wouldn’t have the option to switch from one manufacturer to another. Market competition is what gives customers the choice to move their business to a manufacturer that doesn’t play fast and loose with safety standards.

Safety

Kang likewise does not explain why the list of aircraft with perfect or excellent safety records contains nine Boeing aircraft, seven Airbus aircraft, and two from Bombardier. Why didn’t the profit motive ruin Boeing’s safety record long before the recent mess with the 737-MAX and 787 Dreamliner?

Nor does Kang explain why 2023 was a record-breaking year for safety in commercial aviation, even though all but one of the manufacturers responsible for that safety record – Airbus, Boeing, Comac, Dassault, Embraer, General Dynamics, Leonardo, Lockheed Martin, Raytheon, and Textron – operate as profit-driven neo-liberal capitalist corporations (Chinese state-owned Comac being the exception).

Kang does not explain why, during the Soviet era, the aircraft manufacturers that did not operate under a profit motive – such as Tupolev, Ilyushin, Sukhoi, Antonov, and Yakovlev – had the very worst safety records. So bad, in fact, that in 1994, the International Air Transport Association recommended against all air travel in the former Soviet Union, telling passengers to use trains instead.

Once Aeroflot, the Russian airline, and some of the many ‘Babyflots’ that were created in the aftermath of the breakup of the Soviet Union, were exposed to the profit motive, they worked very hard to improve their safety records and public image by replacing their communist-made fleet with aircraft from… Boeing and Airbus.

Clearly, it isn’t the ‘neoliberal capitalist pursuit of profit’ in general that causes poor safety standards. The aircraft manufacturers that did not operate under that regime had worse safety records than those that did.

Regulation

Kang blames ‘unsafe production practices permitted by a weak regulatory state regime’.

She wants the safety standard failures at Boeing remedied by regulatory intervention, much as regulations have given the world seat belts, airbags, and motorcycle helmets.

There’s an important point to be made about regulated safety, however. Regulations can be, and often are, excessive. They pursue perceived safety even if the cost of doing so is very high.

Passenger air travel is among the most highly regulated industries in the world, because of public safety fears. It is also by far the safest mode of transport in the world.

The US National Safety Council keeps a record passenger death rates per 100 million miles travelled for airlines, buses, trains, and passenger vehicles.

Scheduled airlines are consistently safer than any other mode of transport.

And not by a little, either. In 2021, scheduled airlines were 100 times safer than buses, 5 000 times safer than trains (yes, buses are often safer than trains), and 57 000 times safer than cars.

In 2021, there was one airline passenger death for every trillion miles travelled in the US.

To put that in perspective, Sedna is the furthest observed object in the solar system, three times farther away from Earth than Pluto. A trillion miles is about four return journeys from Earth to Sedna.

If the scale of the solar system does your head in, a trillion miles is about 40 million times around the equator.

In other words, air travel is extraordinarily, astonishingly, almost perfectly, safe.

The price of safety

But such high safety standards come at a cost. Because of the extremely high regulatory requirements for safe flight, air travel is out of the reach of the majority of the world’s people. It is a luxury reserved for the rich.

Most people don’t fly often, if at all, not because they’re afraid of flying, but because they cannot afford to fly.

In a free market, the customer would get to decide what their risk tolerance is and how much they’re willing to pay – in either money or convenience – for safety.

The fact that almost everyone happily drives a car, rides a bike, or walks to work suggests that people’s actual risk tolerance is considerably higher than one death in four trips across the solar system, or one death in 40 million trips around the Earth.

If you leave it up to regulators, you might get almost perfect safety levels, but only at the cost of pricing the product out of reach of ordinary people. (This is the same reason why so many people cannot afford new cars with all the safety bells and whistles.)

Kang never explains why the high price of near-perfect safety is justifiable when her professed ideological concern is for the plight of the working classes.

Market mechanisms

It is true that Boeing has gone off the rails, in large part because of short-sighted attempts to maximise earnings.

It is equally true, however, that market mechanisms are just as important as regulatory interventions in punishing the company and ensuring that customers have access to sufficiently safe aircraft.

The ‘neoliberal capitalist pursuit of profit’ is not perfect. It cannot guarantee that individual companies won’t succumb to greedy, short-sighted management decisions, nor can it guarantee that individuals or companies won’t commit fraud. But it can guarantee that such failures will be punished and remedied.

The ‘neoliberal capitalist profit motive’ guarantees continuous improvement and self-correction, not necessarily in any single company, but among all companies in aggregate.

Even if regulators did nothing to remedy the safety violations that led to Boeing’s travails, the market is already doing so, by diverting both capital and customers to Boeing’s rivals. This suggests that there really is significant demand for irrationally high safety standards in aircraft – at least among the people wealthy enough to fly.

The market will force Boeing to either shape up or go under. Either way, the market will ultimately solve the problem, with or without regulatory interference.

Shallow understanding

Unfortunately, left-wing political science professors like Kang, never having studied economics, have no clue how this market process works.

Their understanding is shallow: because company shareholders want profits, they want costs to be cut, which they achieve by sacrificing safety and reducing worker rights and giving consumers poor products… ergo, the profit motive is intrinsically bad.

They don’t see that this is just a microcosm. Companies don’t operate in isolation, and an entirely different dynamic operates at a larger scale, where rival companies compete with each other not only for customers, but also for employees.

This drives up quality, puts a floor under wages, and drives down prices. Low quality or safety standards incur a reputational cost that can actually reduce both revenue and the capital available to the company, so excessive, reckless cost-cutting usually backfires.

Left-wing political science professors are always ready to pounce on scandals at capitalist corporations, without acknowledging the self-correcting mechanisms of the market.

And they will never admit that their fever dream of a regulatory state sans profit motive is exactly what caused the pitiful safety record of Aeroflot.

 

SOURCE:Is poor safety ‘endemic to capitalism’? – Daily Friend