The mechanics strike at Northwest Airlines raises important economic questions: What role should government play in airplane safety? How can we maintain safety as airlines perform less maintenance themselves and contract more out, even to shops in other countries? Regardless of how this strike ends, these issues will not go away.
Most economists agree that regulating aviation safety is a legitimate government function. A few quasi-libertarians like Milton Friedman might argue that no government action is necessary. Accident reports will tell consumers which airlines are dangerous and which are safe. Good safety records will attract customers and bad ones will drive them away. Airlines that devote the appropriate amounts of resources to maintenance and other safety measures will earn higher profits than those that do not. The market will meet the need.
Most economists would argue, however, that libertarians ignore an important “information problem” that keeps the market from functioning well in this case. Accidents are infrequent and their causes vary. Average consumers have a hard time distinguishing between safe and unsafe carriers. Government action is needed to solve this problem, though that need not mean a large government agency or many public employees.
Regardless of economists’ debates, the public supports government action to ensure aviation safety, including supervising airplane maintenance. The Federal Aviation Administration has had this responsibility for decades.
Though misunderstood by many, the move to deregulate the airline industry started by President Jimmy Carter in 1978 was not intended to reduce safety requirements. Deregulation applied only to route and fare regulations administered by the now-defunct Civil Aeronautics Board.
By statute, FAA inspectors oversee all work on airplanes carried out by any civilian entity. Work by contract shops is supposed to get the same scrutiny as that done by airlines in-house. Whether such contract firms are physically located in this country or not should make no difference. All are supposed to meet the same requirements.
However, much evidence suggests that FAA supervision of work done at non-airline facilities is less stringent. Moreover, the frequency and intensity of FAA inspections is reportedly less for facilities outside the U.S., even when such facilities are in countries where the regulatory agencies are weak. So far as this is true, the mechanics have a legitimate beef and citizens have a genuine concern.
The FAA faces real funding problems. The airline industry has grown rapidly in the past 25 years, but government appropriations for FAA inspections and maintenance supervision have not kept pace. Nor has funding increased in proportion to the proliferation of independent maintenance contractors. Finally, Congress has not provided much money to cover the higher costs of inspecting shops in Asia or Eastern Europe.
This may typify problems caused by the “starve the beast” approach to government some conservatives champion. Those calling for drastic cuts in the size of government assert that a conscientious Congress can maintain or even increase funding for crucial government functions while cutting only fat. In theory, they may be right.
In practice, to use a biblical phrase, budget pressures “fall on the just and the unjust alike.” Presidents and Congresses both crimp important but low-profile functions like aviation safety to preserve other programs that are popular with voters.
Indeed, the rhetoric tossed out about burgeoning federal spending ignores the fact that virtually all such growth takes place in a few programs: Social Security, Medicare, Medicaid and national debt interest. Aviation safety is not the only core program with constricted funding. Funding for national parks, human and animal disease prevention, basic scientific research and so forth has shrunk, adjusted for inflation or relative to the economy as a whole.
It is troubling that effective supervision — whether over traditional airlines or contract operations, domestic or foreign — constitutes a legitimate issue in a labor strike.
It is easy to criticize Congress or the president, but elected officials do what voters want them to do. For a quarter-century, presidents and congressional majorities of both parties have underfunded aviation safety. The implicit message is that voters do not place a high priority on aviation safety.
One can fault the FAA for not allocating its supervisory resources where the need is most critical. Inertia is a huge force in bureaucracies. Historically, major airlines did the bulk of maintenance and so the FAA devoted the bulk of its resources to supervising these firms. As the industry restructured, FAA resources did not fully follow the work.
To the extent that lighter regulation reduces firms’ costs, lax FAA supervision of non-airline maintenance shops gives such companies an accounting cost advantage that does not represent any real saving to our economy as a whole. The outcome is that our society is poorer than it need be.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.