Shaky oversight…

If you follow this blog for any length of time, you’ll probably agree that I watch a fair bit of movies. The wife and I watch the other day, Inside Job, in hindsight, not the best movie to watch before leaving to work, all those other pressure are enough strain on the whole affair as it is.

The Inside Job is a documentary on the economic meltdown. The authors meticulously details the players and their reckless action which caused, and continue to cause, so much hardship for the larger majority. While these reckless gamblers got bailed out, and still collected obscene amounts of money, the rest of the world continues to suffer, with skyrocketing food and fuel prices and no jobs to pay for these.

Of course one could dwell, at length, on the sheer stupidity of these arrogant assholes, but that’s not the point of this post. One of the things that really stuck in my head was the complicity of the industry oversight agencies, into this great train wreck that is the economy.

The credit rating agencies is what I am talking about, who although not directly related to the financial companies, and the products they rate, as a measure of “safety” as an investment product, obviously failed miserably. Even on the days Bears and Sterns and Lehman Brothers failed, the credit rating companies were listing these companies with the best possible credit scores.

The shipping industry, in my humble opinion, might also mirror the financial industry, albeit it is unlikely that it poses such a threat to nations – then again, tell that to a coastal nation where a super sized tanker has run aground. “Arms length” agencies, on their good name alone, are now responsible for the bulk of safety evaluation of a ship, and therefore, also for the most part, the enforcer. I am of course referring to classification societies.

I am, and always have been puzzled by the strange relationship between “Class”, the ship, the shipowner and the regulators. To me, it would seem logical that an entity who competes for business from a shipowner, yet may obligate that shipowner to stop cutting corners, is in a direct conflict of interest. Eventually the shipowner will just change class, and after a while that class will be forced to bring down standards, or be withered to oblivion.

I am sure this is not news to anyone, but I think it is a very serious predicament deserving of second look. This “meltdown” has truly exposed some major gaps in reality, and our views of things; perhaps the marine industry ought to see if we are as exposed to serious consequences, as the business models appears to be near carbon copies.

With government regulators unable, or unwilling, to tackle these issues, how are we to make sure ships and shipping is safe. To what point do we continue to repeat the capitalist mantra, “let the market sort it out”. It certainly did in the US, rippling around the world like a financial tsunami, unfortunately the third class passengers on the SS Greed are left paying a heavy price.

With a similar industry structure, is it inevitable that this behaviour lead to a calamities to call our own. Or perhaps it already has, but with only a handful of sailors dying, or the environment contaminated for years, there are few people getting worked up.

Family can be “drowned” by lawyers; environmentalist are just nut jobs anyways. The rest, well, the insurance paid out because the ship was classed, and therefore “safe”. The shipping company’s bottom line probably even looked better for the quarter resulting from the insurance proceeds…. Can you say BONUS time!!! After all, the investors love to hear that “earnings beat expectations”!

I actually wrote this entry quite a while back, but got so busy with work, family and Maritech that I did not get around to posting it until today. During Maritech, a couple of weeks ago, Jeff Smith, National Council Chair of the CIMarE, gave a presentation of Classification societies and their future roles. The paper is excellent in laying out the history and future of class. You can download the paper here.

In the mean time, the documentary trailer for Inside Job is below, the official website is here.

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