The last several months have seen one grim revelation after another about
GM's ignition system problems. We've learned that GM may have
known as early as 2001 that its ignition switches could shut off, killing
power steering and causing crashes. We've also learned that a part
which costs about 57 cents could have fixed the problem. And we've
learned that there was no recall of the dangerous cars until this year,
even though GM may have known about the problem for more than a decade.
We've seen this movie before. Recently, Toyota was forced to admit
its cars could experience "unintended acceleration" and cause
drivers to lose control. This happened after Toyota denied the existence
of the problem for years, and scorched the earth defending unintended
acceleration lawsuits. A few months ago, Toyota agreed to pay $1.2 billion
to the Justice Department to avoid prosecution for misleading the public
about this problem.
In fact, this sorry tradition goes back decades. There are many other notable
examples, including rollover and roof crush problems with Ford SUVs and
exploding gas tanks on Ford Pintos all the way back in the 1970s. These
recurring episodes make two things clear: first, that the industry will
not police itself; and second, that the government can't be counted
on to hold the industry responsible for safety issues.
The reason an industry will not police itself is simple: bottom line concerns.
Employees and officers who are evaluated on financial performance have
enormous incentives to ignore or hide problems which hurt profits. In
general, design changes only happen when the cost of dealing with the
lawsuits or regulatory fines exceed the cost of making the changes.
The reason government can't be counted on is more complex, but is largely
the result of two factors. The first problem is one of resources. Many
government regulatory agencies have so little funding and so few employees
that they simply can't address all the problems caused by an industry.
Even the most committed regulators end up dealing with only the problems
they perceive as the most serious, and let others go by the wayside. Safety
issues only get attention when the death toll rises or a disaster occurs.
The second problem is what economists call "regulatory capture."
That's the insidious process by which a government agency designed
to protect the public gradually gets infiltrated by the industry it is
supposed to regulate. The agency ends up advancing the interests of the
industry rather than the public, and it falls asleep at the regulatory switch.
Because industry and government aren't the answer to the safety problem
by themselves, there needs to be another watchdog. Fortunately, we have
one: the civil justice system. Civil trials concerning dangerous or defective
products can result in substantial verdicts against careless manufacturers.
While these manufacturers don't want to police themselves, they do
understand the affect that large damage claims can have on their bottom
lines. They will change, even if they do so grudgingly, when the alternative
is to get clobbered in court.
In the auto industry, civil lawsuits have resulted in an impressive number
of safety improvements. Besides the examples mentioned above, litigation
has led to safety changes such as safer door latches, which prevent car
doors from flying open in accidents; electronic stability control, which
helps prevent rollover accidents; better tire design, to prevent tread
separation and loss of control; stronger seats, which are less likely
to collapse in accidents; and side impact protection, which helps prevent
serious injuries or deaths in those types of collisions.
In effect, the civil justice system acts as a powerful safety regulator,
picking up the slack when government lacks the resources or fortitude
to require positive changes. Countless lives have been saved, and countless
injuries have been prevented, by this
de facto regulation. This is worth remembering when the insurance industry and corporate
America demonize consumer attorneys and the work they do in our courtrooms.