The Etowah River Terminal, source of the leak into the Elk River.

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The disaster in Charleston, West Virginia is just another day in the life of corporate America. Freedom Industries is private company that processes coal. A one inch hole in a holding tank dumped an estimated 7,500 gallons of 4-methylcyclohexane methanol into the ground, and a big part of it leaked into the Elk River. The Freedom Industries plant is just above the intake for the water system of Charleston, owned by West Virginia Water Company, a wholly-owned subsidiary of American Water Works Company, Inc. Water is expensive in Charleston. According to the Public Service Commission of West Virginia, 4500 gallons of water costs either $50.52 or $60.50. By comparison, the average cost for that amount of water in the suburbs of Chicago is $14.54. American Water Works stock has doubled since the Great Crash, so it must be wonderful.

Freedom Industries is privately owned. David Gutman of the Charleston Gazette explored public records on the company and its owners. The company failed to file its required annual reports and lost what Gutman calls its “business license”. I’d guess it’s more likely that the Secretary of State cancelled its corporate registration in an automated purge of records, and then reinstated it when the company got around to filing the reports. He doesn’t discuss the secretary of the corporation, who is named in the records.

Gutman doesn’t offer any explanation for how the owners of Freedom Industries got into the business. He does say the President, Gary Southern, is “… listed as president of Enviromine, which makes products to help remediate environmental problems from mining.” Maybe, but the google doesn’t show any plausible entity with this name.

This is the kind of real world disaster that economists don’t include in their models. They tell us that markets are self-correcting and that they are always better than any government provision of services or regulation. They have no explanation for this kind of thing, but assure us that the market will solve the problem better than the government. Hmmmm.

1. American Water Company is planning to give its customers a credit for 1000 gallons of water. That works out to about $11.20 per customer. Apparently, American Water has no backup plan, and is relying on the Federal Emergency Management Agency to provide bottled water.

All of the news operations say that the first anyone heard about the problem was people calling to ask why their water was light blue and smelled of licorice. Apparently, American Water didn’t notice that it was selling poisoned water to people. No one thought to ask whether and how the company monitors water quality, despite its location in the heart of a chemical processing area.

2. Freedom Industries located its storage facilities on the Elk River for ease of transport. Apparently it didn’t notice a 1 inch hole in one of its tanks, and apparently its provisions to protect that river were inadequate. The West Virginia Department of Environmental Protection says the facility is exempt from inspection and permitting, because it stores chemicals, and doesn’t produce them.

In the wake of the disaster, the DEP has authority to coerce Freedom Industries.

The DEP said the remediation must include, at a minimum, “installation of interceptor trenches adjacent to the Elk River, and the installation and maintenance of booms and absorbents in affected waterways.”

The DEP ordered the company to immediately conduct an integrity test of all above-ground storage tanks and secondary containment structures for its entire facility. The company also must provide a report that documents the integrity of its storage tanks, the DEP said.

Doesn’t the DEP have anyone to do this itself? No doubt the integrity tests will be performed by another private business.

The parallels with the fertilizer plant explosion in West, Texas are striking. Let’s hope Freedom Industries has plenty of insurance.

3. The costs of dealing with this problem will be borne by someone, but we don’t know who, just yet. I doubt Freedom Industries has the money to pay; I bet the value of its entire operation is less than the losses to businesses, let alone the costs to individuals in the city. There has been no report of the amount of insurance held by Freedom Industries.

The residents of Charleston are seriously damaged by this. All of the hotels and restaurants are closed, and so are parts of other businesses. How do people feed themselves when there isn’t any water? How many frozen meals are available in the grocery stores? Rich people will be able to leave. Poor people are stuck, just like they were in New Orleans.

How many of the restaurants and hotels are paying their hourly employees and waiters? How are the workers to recover? How are they going to pay their bills, their rents, and their mortgages? How many will be forced into bankruptcy or foreclosure? Are they going to be forced to file a class action and wait for years for it to be resolved? In the meantime, the owners of hotels and restaurants and other businesses will eat up all of the insurance. By the time these suits are resolved, there won’t be any money.

We know the answer: working people will pay for the losses inflicted by the private sector.

4. Maybe private charities should solve this problem. Isn’t that what the apostles of the Free Market say?

5. There is no such thing as a market. There are only the people who run these businesses. We see how that worked out.

This is Financial Darwinism in action. Societies that refuse to use the tools of democracy to control the owners of capital suffer and die.