Economic Debate

Who is Responsible for the Damage Caused by Asbestos?

Fellow, RIETI

As the number of deaths attributed to asbestos poisonings rises, it is impossible to tell where it will end. How can we create a system of accountability and remediation to deal with this problem, and how can we prevent similar problems from occurring in the future?

The government must take uncertain dangers seriously

There have been cases of asbestos-related health problems as far back as the 1960s, not only among workers at asbestos factories but also among their families and neighbors. As was revealed in the Diet in July 2005, the government was aware of the dangers of asbestos as far back as 1976. Asbestos sprays were banned in 1975 but the highly dangerous crocidolite, or blue asbestos, was not banned until 1995. In the interim, more than 6 million tons of asbestos were used in Japan.

Why were steps not taken much sooner to regulate the use of asbestos and to mitigate the harm to nearby residents? A number of reasons including sectionalism among ministries can be put forward, but the most important factor was the "uncertainty" of the asbestos problem. The relationship between asbestos and mesothelioma and other cancers has only recently been established by advances in epidemiology. Moreover, asbestos manufacturers asserted it was better to continue "cautiously" using the substance in view of the unknown dangers of asbestos substitutes.

On the other hand, if asbestos were banned, it was certain that producers would suffer. When the risks of a product are uncertain, it is difficult for the government to demonstrate the need to impose a ban; it cannot justify the harm done to industry based on such uncertain risks. This problem is not unique to Japan. The U.S. government implemented a step-by-step ban on the use of asbestos in the late 1980s, but lost to manufacturers in court. As a result, the restrictions were declared void.

We thus face the difficult problem of determining how far the government should go in tackling such uncertain risks. Even where a product presents uncertain health or environmental risks, I believe it is essential that the government and courts establish a precautionary principle. In such cases it is important for the government to assess the degree of the risk and to establish beforehand standardized procedures of analysis and risk-management methods.

Don't let companies avoid responsibility

How does one mitigate the actual damage caused by asbestos? In the case of asbestos used in the workplace, workers' compensation insurance applies. But in the case of damages suffered by family members and residents near worksites, a system similar to that of environmental remediation is likely to be employed. In considering remedies, one of the unique aspects of the asbestos problem is the 30-40 years it takes for symptoms of asbestos poisoning to appear. This makes it very difficult to determine when and how victims were exposed. In addition, many of the factories and worksites responsible for such asbestos exposure have closed. When those responsible for the damage no longer exist, the systems of workers' compensation and environmental remediation meant to cover such damages no longer function.

In the case of workers' compensation, the victims receive payment from the government, but the costs of such compensation are borne in full by the companies themselves. This principle applies to the damage caused by asbestos. Similarly in the case of environmental remediation, compensation for damages is paid by the polluter. In other words, the company bears the cost of such damages. But when the company responsible for a particular case asbestos contamination cannot be identified, or if it no longer exists due to bankruptcy, this "polluter pays" principle no longer operates. In reality, national and local governments must, to some extent, bear the costs of such compensation, but a problem arises when this is taken too far. Since such public expenditure comes from national and local taxes, the burden is spread widely among the taxpayers. In this case, asbestos contamination companies have nothing to lose in avoiding their responsibilities. This would violate the principles of social justice.

In other countries, businesses have largely been forced by the courts to pay damages. In the U.S., company after company has been bankrupted by such compensation costs. Rather than taking the easy route of raising taxes to pay for such compensation, it is better to determine who is responsible for the damage and make them bear the costs. For example, if one were to pursue overseas asbestos mining companies, importers, and related upstream businesses, many of those responsible could be found. In the U.S., such business and their insurers have set up compensation funds for asbestos damages. This is one method worth considering.

The need for 30-year advance planning and individual responsibility

The asbestos problem has also shown the organizational limits of industry and government. It is not realistic to expect businesses, as organizations, to deal appropriately with a problem that can take 30 years to appear. Normally, corporate management can only plan five to 10 years in advance. Asking businesses to plan 30 years in advance is tantamount to asking them to plan for eternity: Those responsible for taking decisions today will have retired and the company itself may have gone out of business by that time.

The fact that company employees, managers and shareholders have limited liability backfires in this instance. Businesses take a variety of risks in order to grow, but in the modern corporate system, individual businesspeople are not held responsible for losses beyond a certain point. In other words, a system of limited liability is used to enable companies to take risks more easily. This system allows companies take risks not only in their business activities but also with the health and safety of workers and people living nearby. In addition, because the sense of individualism is characteristically weak in Japan, even if one tries to determine the responsibility of specific organizations such as business or government, it is not common practice to hold individual decision-makers responsible for their actions. This is one factor behind the slow response of business to the asbestos threat.

Even if they are not a problem at present, other substances are likely to cause unknown damage in the future, as was the case with asbestos. For example, the Tokyo metropolitan government has begun regulating the particulates in diesel exhaust and the dioxins produced by incineration of various materials. And in the U.S., consumer groups have filed suit against companies over carcinogens used in fluorine resin Teflon, alleging a cover-up by manufacturers. These potential future risks are similar in structure to the damage caused by asbestos. To prevent such problems before they arise, a comprehensive precautionary principle must be established. However, based on current organizational and social practices, it is difficult to preemptively deal with uncertain risks.

One possible response would be to hold both organizations such as business or government and individuals responsible in cases where serious health effects occur. Many substances that have for decades been scientifically established as hazardous are currently labeled merely "potentially hazardous." Although they are aware of the dangers, because individual decision-makers may feel they can escape responsibility, they are slow to respond to such dangers. If individual decision-makers in companies and the government are made aware that they may be sued for damages decades later, they are likely to become more sensitive to the risks of hazardous substances.

>> Original text in Japanese

* This column originally appeared in Japanese in the July 25, 2005 edition of the Asahi Shimbun. Any reprinting of this column without the approval of the author and the Asahi Shimbun is prohibited.

July 25, 2005 Asahi Shimbun

August 10, 2005

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