Deregulation Can Kill You
By Ross Eisenbrey, Economic Policy Institute
When you hear politicians singing the virtues of deregulation, remember the Grenfell Tower fire. Last month, 80 people, including young mothers and children, died in an inferno that destroyed the 24-story Grenfell Tower apartment building in London. The undisputed cause of this completely avoidable tragedy can teach us important lessons about government regulation and deregulation.
The blaze that devastated the building occurred when a faulty refrigerator near a window ignited the apartment tower’s exterior cladding, a sheath of aluminum and flammable insulation that was recently added. The cladding panels used on Grenfell Tower, which sandwich a layer of polyethylene between two aluminum sheets, are combustible. In most countries, the company that manufactures the panels recommends that they not be used on buildings taller than about 33 feet, or two stories, the reach of a firetruck’s ladder.
In most countries, including the United States, combustible panels like those installed at Grenfell Towers would be illegal. U.S. fire codes require fire testing of the cladding, and as the New York Times reports, “no aluminum cladding made with pure polyethylene – the type used at Grenfell Tower—has ever passed the test.”
How, then, did such dangerous cladding get added to Grenfell Tower? There’s a two-part explanation: weak regulations and cost-cutting that did not take safety into account. When the local government decided to sheath the building in order to make it more attractive and better-insulated, it consulted an architect who suggested a zinc cladding with a fire-retardant polyethylene core. But the housing board wanted cheaper options and decided to substitute the combustible polyethylene aluminum cladding because it saved about 300,000 pounds (less than $500,000). The minutes of the meeting at which the cheaper, more dangerous cladding was chosen provide no evidence that safety issues were considered.
Why was the combustible cladding even an option? Why isn’t it prohibited in Great Britain as it is in the United States? The New York Times reports that British regulators turned down requests to ban the flammable cladding even after another fire killed six people and injured 15 others at another public housing complex. When questioned by the public, the top government regulator repeated the mantra of anti-regulation ideologues around the world: requiring safe cladding would limit flexibility. Obviously, it does limit the choices; it limits them to materials that won’t ignite and cause an inferno that kills scores of helpless people.
When firefighters and engineers called for more stringent testing of building materials, manufacturers and construction industry representatives successfully lobbied the British parliament against any new rules to prevent fires. They argued that the benefits of more testing were speculative and that more expensive, fire-resistant materials were not worth the expense.
The British government’s attitude resembled the current anti-regulatory views of the majority in Congress and the Trump administration, which put “flexibility” and maximizing options above other regulatory goals, such as secure retirement income or protection from carcinogens in the workplace. When President Trump ordered the Labor Department to reconsider the Obama administration rule requiring financial advisers to act in the best interest of their clients rather than their own self-interest, the first factor he directed the department to consider was whether the rule will limit the kinds of products that can be offered to retirees. Well, of course it will! Products that aren’t in the retirees’ best interests will no longer be offered, even if they’re highly profitable for Wall Street and the financial industry.
The British government didn’t only resist attempts to strengthen the fire codes (there are no requirements for automatic sprinkler systems, fire alarms, or loudspeakers to provide emergency instructions), it also passed a law that significantly weakened enforcement. Responding to calls from British industry to eliminate at least one regulation for every new one issued, the government removed a requirement that government inspectors certify fire code compliance, substituting self-policing by industry. In this country, President Trump issued an executive order calling on agencies to eliminate tworegulations for every new one issued.
The Grenfell Tower tragedy and the failure of Great Britain’s anti-regulatory approach to fire safety should alarm Americans about the anti-regulatory fervor in Washington.
Here are the lessons to take away from the London fire:
- Companies will sell what the regulations permit. If it maximizes their profit, contractors will install flammable materials if the law allows it, and residents will die. Similarly, if the law allows financial advisers to recommend products that deliver poorer returns on investment for retirees but higher profits to the advisers, those products will be offered and retirees will be hurt. If safety is the outcome we want, we have to require it through government regulation.
- When politicians promise deregulation, without specifying which regulation they have in mind, we ought to be worried. It makes no sense, for example, to kill two regulations for every new one issued. If a regulation is doing more harm than good, it should be eliminated, but the decision should be based on evidence, not a rigid anti-regulatory formula that ignores the benefits of current rules.
- Focusing on costs without adequate consideration of benefits is all too common and potentially disastrous. Costs can be easily identified, but benefits are often much harder to identify and quantify. The $500,000 savings from buying cheaper, but flammable, cladding seemed like a big savings to the government officials in London who chose it. Did they value the 80 lives that were lost as a result? The cost was obvious, but the benefits in terms of 80 deaths avoided were obscure. Industry always knows (or claims to know) the cost of new requirements like reducing exposure to silica dust on the job, but they ca not be relied on to assess the risks to the public associated with failing to regulate. The future suffering of workers with lung disease or cancer, and the suffering of their families, for example, can never be as obvious and tangible as the costs to a business of changing to safer workplace practices.
- Regulations are usually designed to protect people in situations where they cannot protect themselves – workers, retirees, consumers, children—rather than super wealthy. For the wealthy and powerful, regulations can be a nuisance that limits their options and, potentially, their profits. It makes sense, perhaps, for the top one percent to be anti-regulation. But for the rest of us, and especially for working class people like the victims of the Grenfell Tower fire, sensible regulations might be all that stands between us and financial disaster, a chronic disease, or a plane crash. When we hear politicians calling for deregulation we should be wary and think about the cost of a death or an illness compared with the cost of a safety measure. Throughout history business interests have fought even common sense regulation. It’s up to the public and policymakers who care about workers and their families to demand safe housing and safe workplaces.