When governments socialize risk — shift it from the private sector to the public — they create what economists call moral hazard. This is the hazard that the private actor, who no longer bears the risk, will do more risky things than he would have done, if he had borne the full liability of his actions. It is a moral problem; the irresponsible actions of one person or entity harm an innocent bystander. It is also an economic problem because it induces firms to engage in uneconomic activities. The nuclear industry has made every attempt to minimize its liability internationally. There are primarily two reasons for this. Firstly, because the higher liability would make their insurance coverage prohibitively expensive. This also underlines the fact that nuclear energy is not really viable as a purely private economic enterprise. Secondly, if the amount of nuclear liability is calculated correctly, it would also reveal the astronomical economic cost of nuclear accidents. While the most conservative estimates for the clean-up of Fukushima accident are around $250 billion, the total cost of Chernobyl was over 600 billion US dollars. Privatising profits, socialising risks Another question that must be asked here is, if the Modi government has so much faith in the forces of the market, why is a publicly-owned Indian insurance company being made to secure financial protection for foreign as well as domestic nuclear corporations? When private insurance companies have been pushing for reforms, encouragement and greater slice of the market, why don’t they come forward and provide insurance for the big players of the nuclear industry? As it has been asked several times by independent experts, if the nuclear industry wants people to trust their claims on safety and not hesitate to thereby in effect put their lives at stake, why is it not ready to put its money where its mouth is?
Posted on: Tue, 27 Jan 2015 07:50:51 +0000
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